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Peer Effects in Corporate Decision Making: Mechanisms Influencing M&A Activity

Author

Listed:
  • Jingwen Chen

    (Nanjing University of Finance & Economics Hongshan College)

  • Yujin Shen

    (Nanjing University of Finance & Economics Hongshan College)

  • Yifan Zhu

    (Nanjing University of Finance & Economics Hongshan College)

  • Yihan Zang

    (Nanjing University of Finance & Economics Hongshan College)

Abstract

This study investigates the mechanisms underlying the peer effect in merger and acquisition (M&A) decisions using a sample of Chinese A-share listed companies from 2014 to 2023. Employing a two-stage regression model, the analysis yields several key findings. First, there is a significant industry-level peer effect in M&A activities; a firm’s probability of making an M&A decision is strongly and positively influenced by the M&A activities of its industry peers. Second, the magnitude of this effect varies by firm size. Specifically, the M&A decisions of small enterprises within an industry are substantially shaped by the actions of their peers. In contrast, for large enterprises, this peer influence is not statistically significant. Third, the intensity of market competition plays a crucial moderating role. The peer effect is pronounced and highly significant in industries characterized by intense competition while this effect becomes insignificant in industries with either low levels of competition or high levels of oligopoly. These findings provide nuanced insights into corporate investment behavior.

Suggested Citation

  • Jingwen Chen & Yujin Shen & Yifan Zhu & Yihan Zang, 2026. "Peer Effects in Corporate Decision Making: Mechanisms Influencing M&A Activity," Advances in Economics, Business and Management Research,, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6239-672-2_44
    DOI: 10.2991/978-94-6239-672-2_44
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