Earnings Attribution and Information Transfers
David S. Koo
University of Illinois at Urbana-Champaign
Juan (Julie) Wu
University of Georgia
P. Eric Yeung
Cornell University - Samuel Curtis Johnson Graduate School of Management
January 7, 2014
Management frequently attributes earnings news to various economic events. Using textual analysis, we identify the economic factors underlying earnings news from press releases. We document a wide range of industry-wide shocks and firm-specific actions to which the earnings news in management forecasts is attributed. As expected, earnings attributions significantly affect peer firms’ price reactions to the earnings news. Specifically, earnings news attributed to industry-wide trends or firm structural changes leads to positive information transfers but news attributed to firm competitive moves triggers negative information transfers. Further evidence reveals that the strength of information transfers varies with firm-level rivalry within the industry, the nature of industry-level rivalry, and the credibility of earnings attributions.
Number of Pages in PDF File: 48
Keywords: Earnings Attributions, Information Transfers, Management Forecasts, Textual Analysis
JEL Classification: G14, M41
Date posted: November 20, 2010 ; Last revised: April 9, 2014
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