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
August 30, 2015
This study examines whether a firm’s business strategy affects their information environment. Organizational theory suggests that firms following an innovative “prospector” strategy are more likely to have attributes typically associated with information asymmetry (R&D; growth options) than firms following an efficient “defender” strategy. However, prospectors are also hypothesized to have greater external and internal disclosure mechanisms in place to reduce information asymmetry than 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 than defenders. Our results suggest that business strategy does affect firms’ information environments, incremental to known determinants, and that strategy likely serves as a useful context for understanding a firm’s underlying information environment.
Number of Pages in PDF File: 47
Keywords: business strategy, information asymmetry, information environment, voluntary disclosure
JEL Classification: D21, D80, L21, M41
Date posted: October 16, 2012 ; Last revised: September 3, 2015
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