Peer effects in cross-regional investment: evidence from China

This study investigates whether, and why, product market peers influence firms’ cross-regional investment decisions, which are often hindered by information asymmetry and market segmentation in China. Using web-crawling and text-parsing algorithms to identify product market peers, we examine a sample of Chinese listed firms from 2005 to 2022. We find that firms are more likely to establish cross-provisional subsidiaries in response to similar moves by their peers, especially under intense competitive pressures. Robustness tests, including instrumental variable approach and alternative model specifications, confirm the validity of these results. Our study broadens the understanding of cross-regional investment drivers by highlighting the role of inter-firm competition and contributes to the growing literature on peer effects in corporate decision-making.