Credible Disclosure of Industry-Wide Information Through Trade Associations: Evidence from the Semiconductor Industry
39 Pages Posted: 18 Nov 1996
Date Written: August 1996
Prior analytical research suggests that competitive firms within an industry may not voluntarily share their private market information through a trade association. Given legal restrictions which preclude trade associations from compelling participation or accurate reporting by firms or revealing their proprietary data, it is uncertain whether trade associations can design and implement systems to collect and transmit useful market information. This paper documents significant stock price movements on release dates of aggregate industry data on new orders and shipments by the Semiconductor Industry Association (SIA) each month which are positively associated with changes in the numbers disclosed. The industry information released is positively correlated with earnings changes in the subsequent quarterly earnings announcements of firms within the industry. Additional tests indicate that semiconductor firms? stock prices respond significantly to their quarterly earnings announcements, and that the prior disclosure of aggregate industry information does not materially reduce the valuation relevance of earnings reports of semiconductor firms . Overall, these findings support the hypothesis that trade associations are able to obtain reliable data from firms, aggregate it into statistics that do not reveal a specific company?s information, and then distribute aggregate statistics back to participating firms in a timely manner. Our analysis further suggests that while the aggregate industry data are informative for investors in high-tech stocks, they do not reduce the valuation impact of semiconductor firms? quarterly earnings.
JEL Classification: D82, G12, M41, L83
Suggested Citation: Suggested Citation