Geographic Peer Effects in Management Earnings Forecasts
71 Pages Posted: 25 Aug 2017 Last revised: 25 Feb 2022
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Geographic Peer Effects in Management Earnings Forecasts
Geographic Peer Effects in Management Earnings Forecasts
Date Written: January 18, 2022
Abstract
We find that the likelihood that a firm voluntarily provides an earnings forecast is sensitive to the extent to which other firms in the same geographic area provide earnings forecasts. This geographic peer effect in forecasting is stronger for firms with greater exposure to local institutional investors, and when firms do forecast, liquidity improves more when a larger fraction of their geographic peers forecast. Further, we use instrumental variable techniques to help alleviate the concern that these geographic peer effects are driven by omitted local economic factors that can lead firms to make similar disclosure decisions. Overall, our findings suggest that geographic peer effects in disclosure choices arise in part due to firms responding to capital market incentives created by local investors.
Keywords: Disclosure, Earnings forecasts, Peer effects, Geography, Local investors
JEL Classification: M40, M41
Suggested Citation: Suggested Citation