Abstract
Purpose- This article reviews literature related to peer effects and different financial decisions. It further summarizes the theory and motives that drive peer effects. Also, the study highlights the influence of industry concentration on peer interaction in financial decision making. This content analysis of scantily available peer effect literature has been performed to highlight the significance of peer effects in financial decision making like investment, cash holding, leverage and many more. Most of the existing peer effects literature focuses on the U.S. However, peer effects also occur in other countries but empirical evidence is comparatively limited. But, managers may take into consideration their industry peers especially if their firms are operating in highly competitive environments. 
 Design/Methodology- Content analysis approach is applied to review prevailing financial literature on peer interactions and financial decisions with a special focus on industry concentration in explaining the peer effects. 
 Practical Implications- As the prime focus of managerial decisions is to maximize the firm’s value. Hence, information about peers would be helpful in making better decisions, especially in highly competitive environments. Also, this review of selected literature provides pathways for future research in investigating the motives of peer effects.
Highlights
Recent empirical findings imply that managers are social agents that are exceptionally networked
A comprehensive corporate survey by Graham and Harvey (2001), indicates that for many financial decisions like capital structure and capital budgeting, publically available information about industry peers is an important determinant in risky corporate decisions
Peer effects are seen in other countries besides the U.S Like, in a Chinese study, Chen and Ma (2017), find peer effects the investment decisions of Chinese listed firms. They find that a one standard deviation rises in peer firms’ investments are accompanied by a 4 percent increase in a firm’s own corporate investments
Summary
Recent empirical findings imply that managers are social agents that are exceptionally networked. A manager may raise a firm’s debt ratio, to increase the debt burden on the competitor firm and bring it on the verge of bankruptcy Another model that explains a slightly different motive for peer effects is the learning behavior model. This model emphasizes that managers use information as a tool for making rational decisions. In peer effects managers utilize the information provided by peer firms actions or characteristics with regard to capital structure, while deciding their own leverage levels In accordance with these perspectives, Lieberman and Asaba (2006), broadly categorize them into information based and rivalry based theories. These theoretical views provide insight into “why and when” it is more likely that firms may imitate their industry peers
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