Abstract

http://ssrn.com/abstract=2162240
 


 



Does Business Strategy Impact a Firm's Information Environment?


Kathleen A. Bentley-Goode


The University of New South Wales (UNSW) - School of Accounting

Thomas C. Omer


University of Nebraska at Lincoln - School of Accountancy

Brady J. Twedt


Indiana University - Kelley School of Business - Department of Accounting

December 15, 2014


Abstract:     
This study links agency and organizational theories to examine whether a firm’s business strategy affects their financial information environment. On the one hand, firms following an innovation-oriented prospector strategy (“prospectors”) are more likely to have attributes typically associated with information asymmetry (e.g., R&D and growth options) relative to industry peer firms following an efficiency-oriented defender strategy (“defenders”). However, prospectors are also hypothesized to have greater external and internal disclosure mechanisms (analyst and press coverage and voluntary disclosures) for reducing information asymmetry relative to defenders, thus reflecting the complex relationships that a firm’s strategy may have on their overall information environment. We find that prospectors are associated with greater levels of analyst and business press coverage, and issue voluntary disclosures more frequently, compared to defenders. We also find that prospectors are associated with lower information asymmetry relative to defenders. Our results suggest that business strategy does impact firms’ information environments, incremental to known determinants. Furthermore, because a firm’s business strategy is generally stable over time, identifying a firm’s strategy may serve as a useful context for understanding the numerous interdependencies related to a firm’s information environment.

Number of Pages in PDF File: 42

Keywords: business strategy, information asymmetry, information environment, voluntary disclosure

JEL Classification: D21, D80, L21, M41

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Date posted: October 16, 2012 ; Last revised: December 15, 2014

Suggested Citation

Bentley-Goode, Kathleen A. and Omer, Thomas C. and Twedt, Brady J., Does Business Strategy Impact a Firm's Information Environment? (December 15, 2014). Available at SSRN: http://ssrn.com/abstract=2162240 or http://dx.doi.org/10.2139/ssrn.2162240

Contact Information

Kathleen Ann Bentley Goode
The University of New South Wales (UNSW) - School of Accounting ( email )
Sydney, NSW 2052
Australia
+61 2 9385 6930 (Phone)
+61 2 9385 5925 (Fax)
Thomas C. Omer (Contact Author)
University of Nebraska at Lincoln - School of Accountancy ( email )
307 College of Business Administration
Lincoln, NE 68588-0488
United States
Brady J. Twedt
Indiana University - Kelley School of Business - Department of Accounting ( email )
1309 E. 10th Street
Bloomington, IN 47405
United States

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