Topic: Learning from Coworkers: Peer Effects on Individual Investment Decisions
Speaker: Paige Ouimet, Associate Professor of Finance, Kenan-Flagler Business School, the University of North Carolina at Chapel Hill
Date: April 25 (Wednesday)
Location: Building 4, Room 101
We use unique data on employee decisions in the employee stock purchase plans (ESPPs) of U.S. public firms to measure the influence of networks on investment decisions. Comparing only employees within a firm during the same election window and controlling for a metro area fixed effect; we find that the local choices of coworkers to participate in the firm’s ESPP exert a significant influence on employees’ own decisions to participate. Local coworkers’ trading patterns also disseminate to colleagues through the network. In the cross-section, we find that some employees (men, younger workers) are particularly susceptible to peer influence. Generally, we find that employees that are more similar exert greater influence on each other’s decisions and, particularly, that high (low) information employees are most affected by other high (low) information employees. However, we also find that the presence of high information employees magnifies the effects of peer networks. We trace a value-increasing investment choice through employee networks. Thus, our analysis suggests the potential of networks and targeted investor education to improve financial decision-making.
About the speaker:
Paige Ouimet has several research projects looking at income inequality and the role of firms. She also has researched ESOP (employee share ownership plans) and employee stock options and their impact on labor productivity, wages and turnover.
Her research agenda is concentrated at the juncture of finance and labor economics. She is interested in in how decisions studied in finance impact employee stakeholders – specifically how those effects are reflected in firm performance and, hence, corporate finance decisions. Her work has been published in the American Economic Review, Journal of Finance, Review of Financial Studies and Journal of Financial Economics. She received her PhD and MBA from the Ross School of Business at the University of Michigan and her BA from Dartmouth College.