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Compensation peer crash risks and corporate own investments: New evidences from U.S. stock markets

Author

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  • Lin, Yu-En
  • Jiang, Xiao-Tong
  • Yu, Bo
  • Lam, Keith S.K.

Abstract

This study, employing US listed firms with compensation peer disclosures, investigates the impact of compensation and industry peer stock price crash risks on firms' own investments. We document three new evidences in the examination. First, we find that firms' own investments are positively affected by compensation peer crash risks but not industry peers. Second, we show that firms' own investments are explained by compensation peer crash risks only. Third, we demonstrate that the compensation peer crash risks and firms' own investments relation is positively moderated by corporate governance. Besides, additional analysis suggests that peers' incentive effect is a possible explanation to the positive compensation peer crash risks and firms' own investments relation.

Suggested Citation

  • Lin, Yu-En & Jiang, Xiao-Tong & Yu, Bo & Lam, Keith S.K., 2023. "Compensation peer crash risks and corporate own investments: New evidences from U.S. stock markets," International Review of Financial Analysis, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:finana:v:89:y:2023:i:c:s1057521923002909
    DOI: 10.1016/j.irfa.2023.102774
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    More about this item

    Keywords

    Peer crash risks; Compensation peers; Industry peers; firms' own investments; peers' incentive effect;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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