Is There News in the Club?

Abstract

In September 1994, the Wall Street Journal started the Annual Report and Earning Service. Firms participating in this service volunteer to provide on request, to any reader, their annual report and current quarterly information. The daily price quotations of such firms appear with a small symbol like the club in playing cards. We examine the utility of voluntarily disclosing this second-hand information to the public and seek to find the motivation for this disclosure. Our results show that most of the firms that joined this service had below-industry-average performance, or at least were headed in that direction. Membership in the Annual Report and Earning Service brought some short-term benefits in the form of average excess returns, but the economic fundamentals reasserted, and most firms had significant below-average returns at the end of our sample period.

JEL Classification: G12, G14