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Yongda Liu (ICMA) “Internal Information Quality and Financial Policy Peer Effects” – PhD Seminar
This paper investigates how firms’ internal information quality influences the peer effects in its financial policy. By employing earning announcement speed and insider trading profitability difference as measurements, we find that firms with low internal information quality have a high propensity of mimicking the capital structure decision of its product market peers and, by doing so, firms’ operating performance suffers. Our further analysis shows that poor information quality could amplify the agency problem, therefore inducing more peer mimicking.