“Captial Supply, Financial Intermediaries, and Corporate Peer Effects” by Matthew T. Billett
Matthew T. Billett
Jon A. Garfinkel
University of lowa
California State University at Fullerton
We document “supply‐side” channels that connect peer firms’ financial policies. We find constrained firms’ equity issuance depends on peers’ recent SEO activity, and that common financial intermediaries strengthen the transmission of peer effects. Constrained firms react positively to peer SEO announcements, and analyst coverage and institutional ownership increase following peer firms’ SEOs. Constrained firms’ SEO announcement returns and underwriting fees improve with “their” underwriters’ recent peer‐SEO experience. Peer effects are pronounced when there is more overlap with peers’ financial intermediaries and major shareholders. We conclude that supply‐side effects are key in the transmission of peer‐to‐peer financial policies.