Industry Information Transfers: The Effect of Information Environment
18 Pages Posted: 2 Feb 2011
Date Written: June 28, 2008
This study extends the information environment theory of Atiase (1985) that suggests an inverse relation between the information available about a firm and the security price reaction to its release of earnings. Non-announcing firms' security price responses are found to be inversely related to their market value but directly related to the number of peer firm articles appearing in the Wall Street Journal and the historical earnings correlations within their industry. The results suggest that information environment affects the security price relevance of a firm's own and its peer firms' earnings.
Keywords: information environment, earnings information transfers
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