Earnings Attribution and Information Transfers

44 Pages Posted: 20 Nov 2010 Last revised: 11 Apr 2017

David S. Koo

University of Illinois at Urbana-Champaign

J. (Julie) Wu

University of Nebraska at Lincoln

P. Eric Yeung

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: May 8, 2016

Abstract

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.

Keywords: Earnings Attributions, Information Transfers, Management Forecasts, Textual Analysis

JEL Classification: G14, M41

Suggested Citation

Koo, David S. and Wu, J. (Julie) and Yeung, P. Eric, Earnings Attribution and Information Transfers (May 8, 2016). Contemporary Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1711733 or http://dx.doi.org/10.2139/ssrn.1711733

David S. Koo

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

J. (Julie) Wu

University of Nebraska at Lincoln ( email )

Lincoln, NE 68588
United States

P. Eric Yeung (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

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