Take a Leaf out of Their Book : Peer Influence and Corporate Risk-taking

This paper documents that corporate risk-taking is responsive to peer influence through the product-market network. Firms take more risks if they encounter greater peer firms’ risk-taking. Furthermore, we find that firms with low-talented CEOs and poor-performance are more eager to learn from their peers, that better governance firms have the greater need to mimic their peers, and that firms operating in more competitive industries and facing severer financial constraints are more prone to follow their peers. Our conclusion is robust to alternative network identification including endogenous selection of peers.