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The impact of outcome uncertainty on corporate investment compensation peer effects

Author

Listed:
  • Lin, Yu-En
  • Xu, Yu-Xin
  • Yu, Bo
  • Lam, Keith S.K.

Abstract

This study investigates the compensation peer effect of investments and the moderate effect of outcome uncertainty on the compensation peer effect in the US stock markets. We document two new findings. Our results suggest a significant positive relation between firms’ own and compensation peers’ investments and a significant negative moderate effect of the outcome uncertainty on the relation. In addition, we also find that the moderate effect is more pronounced in the low information accuracy groups, suggesting that the inaccurate information disclosure of compensation peers’ investments is the main cause of the negative moderate effect. Our results remain sound after various robustness and endogenous tests.

Suggested Citation

  • Lin, Yu-En & Xu, Yu-Xin & Yu, Bo & Lam, Keith S.K., 2025. "The impact of outcome uncertainty on corporate investment compensation peer effects," The North American Journal of Economics and Finance, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:ecofin:v:76:y:2025:i:c:s1062940824002742
    DOI: 10.1016/j.najef.2024.102349
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    More about this item

    Keywords

    Outcome uncertainty; Moderate effect; Compensation peer effect; Firms’ own investments;
    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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