Geographic Peer Effects in Management Earnings Forecasts

71 Pages Posted: 25 Aug 2017 Last revised: 25 Feb 2022

See all articles by Dawn A. Matsumoto

Dawn A. Matsumoto

University of Washington - Department of Accounting

Matthew Serfling

University of Tennessee; European Corporate Governance Institute (ECGI)

Sarah Shaikh

University of Washington - Department of Accounting; University of Washington - Department of Accounting; University of Washington - Department of Accounting

Multiple version iconThere are 2 versions of this paper

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

Matsumoto, Dawn and Serfling, Matthew and Shaikh, Sarah, Geographic Peer Effects in Management Earnings Forecasts (January 18, 2022). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3025002 or http://dx.doi.org/10.2139/ssrn.3025002

Dawn Matsumoto

University of Washington - Department of Accounting ( email )

224 Mackenzie Hall, Box 353200
Seattle, WA 98195-3200
United States
206-543-4454 (Phone)
206-685-9392 (Fax)

Matthew Serfling (Contact Author)

University of Tennessee ( email )

Haslam College of Business
Knoxville, TN 37996
United States
865-974-1952 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Sarah Shaikh

University of Washington - Department of Accounting ( email )

224 Mackenzie Hall, Box 353200
Seattle, WA 98195-3200
United States

University of Washington - Department of Accounting ( email )

224 Mackenzie Hall, Box 353200
Seattle, WA 98195-3200
United States

University of Washington - Department of Accounting ( email )

Seattle, WA WA
United States

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