Peer effects as a determinant of the speculative motive – A component of cash holdings

Rodolfo Vieira Nunes; Eduardo Kazuo Kayo; Wilson Toshiro Nakamura; Roy Martelanc

doi:10.1590/1808-057x20262335.en

##article.authors##

Rodolfo Vieira Nunes Universidade Federal de Juiz de Fora https://orcid.org/0000-0003-3075-2177
- Conceptualization
- Formal Analysis
- Investigation
- Methodology
- Project Administration
- Resources
- Software
- Supervision
- Validation
- Writing – Original Draft Preparation
- Writing – Review & Editing
Eduardo Kazuo Kayo University of São Paulo https://orcid.org/0000-0003-1027-8746
- Conceptualization
- Data Curation
- Formal Analysis
- Investigation
- Methodology
- Project Administration
- Resources
- Software
- Supervision
- Validation
- Writing – Review & Editing
Wilson Toshiro Nakamura Mackenzie Presbyterian University https://orcid.org/0000-0002-4697-5685
- Data Curation
- Investigation
- Project Administration
- Supervision
- Validation
- Writing – Review & Editing
Roy Martelanc University of São Paulo https://orcid.org/0000-0003-3220-8730
- Data Curation
- Investigation
- Project Administration
- Supervision
- Validation
- Writing – Review & Editing

DOI:

https://doi.org/10.1590/1808-057x20262335.en

Keywords:

peer effect, speculative model, cash holding

Abstract

The objective of this research was to investigate whether peers' investment decision specifically sectoral capital expenditures (CAPEX) influence corporate cash holdings, and to assess the extent to which corporate liquidity is explained by external factors rather than solely by individual company decisions. Although the literature on cash holdings is extensive, the speculative motive remains under-explored, particularly regarding its measurement via a proxy linked to peer investment behavior. This study advances the field by proposing and testing a speculative expectation (SPEC) variable, based on the deviation between a firm's CAPEX and the sectoral median, as a proxy for the speculative motive. The research expands the literature by incorporating peer effects as a determinant of cash policy, highlighting peer influence and broadening understanding of corporate competitive dynamics, a topic rarely integrated into cash-holding models despite its importance in environments characterized by information asymmetry. The findings suggest that managers and analysts should treat cash holdings as a strategic decision adapted to the sector; that is, they should consider factors beyond internal ones alone. Cash-holding levels have implications for financial management, corporate valuation, and policy formulation in contexts of competitive uncertainty. An econometric approach was employed using sectoral and financial data from U.S. companies across industries from 2010 to 2024. The study measures the relationship between sectoral CAPEX (measured by the peer median) and corporate cash holdings, while controlling for institutional and macroeconomic variables. The results reveal a positive, statistically significant coefficient for the SPEC variable across various contemporaneous and lagged specifications, and are robust to sensitivity tests, thereby corroborating the hypothesis that increased relative investment by peers leads to higher cash holdings among U.S. companies.