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Peers’ performance and sensitivity of investment to peers’ stock price: Examining the moderating role of CEO overconfidence

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  • Gong, Rong

Abstract

This study explores how firms adjust their investment based on their peers’ stock prices. I theorize that peer firms with superior performance are more influential on focal firms, which makes firms’ investments more sensitive to the stock prices of good-performing peer firms than to the stock prices of poor-performing peer firms. Meanwhile, overconfident CEOs are more likely to choose firms with better performance as their peer firms and adjust their investments based on the stock prices of good-performing peers. The empirical results show that a firm’s investments are more responsive to the stock prices of good-performing peers than to those of poor-performing peers, particularly among firms with overconfident CEOs. The results suggest that CEO overconfidence affects peer group selection.

Suggested Citation

  • Gong, Rong, 2025. "Peers’ performance and sensitivity of investment to peers’ stock price: Examining the moderating role of CEO overconfidence," Journal of Business Research, Elsevier, vol. 186(C).
    • Handle: RePEc:eee:jbrese:v:186:y:2025:i:c:s0148296324004521
    DOI: 10.1016/j.jbusres.2024.114948
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