Peers’ Disclosure of Investment Plans and Market Feedback to Managers

Capex guidance disclosed by a firm’s peers provides useful information about their peers’ investment plans. In this study, we find a positive association between peers’ capex guidance and managerial learning about investment opportunities from stock prices as captured by the sensitivity of investment to Tobin’s Q, which is consistent with peers’ disclosure of investment plans encouraging investors’ information processing and thereby providing stock price–based feedback to managers. In cross-sectional analyses, we find this relationship is more pronounced when peer guidance is more informative, when managers have a greater incentive to learn from stock prices, and when the market can aggregate more information. We also find that investment corresponding to peer-capex-guidance–affected Tobin’s Q correlates with higher future performance, suggesting that improvement in managerial learning leads to better performance. Overall, our results offer insights into how peers’ disclosure of their investment plans influences information feedback from the market to the focal firm. JEL Classification : G31; M4; M41