Speed Matters: Limited Attention and Supply-Chain Information Diffusion

69 Pages Posted: 3 Mar 2017 Last revised: 19 Dec 2020

See all articles by Ling Cen

Ling Cen

The Chinese University of Hong Kong

Michael G. Hertzel

Arizona State University (ASU) - Finance Department

Christoph Schiller

Arizona State University (ASU) - W.P. Carey School of Business

Date Written: November 1, 2017

Abstract

We develop a measure of the speed of firm-level information diffusion, study how it is affected by limited attention, and examine its effect on real corporate decisions. Using local flu epidemics as exogenous attention shocks, we show that inattention from dual-covering analysts and cross-holding institutions reduces the speed of information diffusion from customer to supplier stock prices. We find that the speed of information diffusion along the supply chain affects the price feedback effect for corporate investment decisions and facilitates coordination between customers and suppliers. Our findings demonstrate that co-attention from key market participants affects information efficiency and generates real economic outcomes.

Keywords: Information Diffusion, Limited Attention, Supply Chains, Firm Investment

JEL Classification: G14, G24, G31, L14

Suggested Citation

Cen, Ling and Hertzel, Michael G. and Schiller, Christoph, Speed Matters: Limited Attention and Supply-Chain Information Diffusion (November 1, 2017). Available at SSRN: https://ssrn.com/abstract=2925460 or http://dx.doi.org/10.2139/ssrn.2925460

Ling Cen

The Chinese University of Hong Kong ( email )

CYT Building
Sha Tin
Hong Kong, Hong Kong
Hong Kong

HOME PAGE: http:///sites.google.com/site/cenling/

Michael G. Hertzel (Contact Author)

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
P.O. Box 873906
Tempe, AZ 85287-3906
United States
480-965-6869 (Phone)
602-965-8539 (Fax)

Christoph Schiller

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

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