Geographic Peer Effects in Management Earnings Forecasts

53 Pages Posted: 25 Aug 2017 Last revised: 31 Mar 2019

See all articles by Dawn A. Matsumoto

Dawn A. Matsumoto

University of Washington - Department of Accounting

Matthew Serfling

University of Tennessee

Sarah Shaikh

University of Washington - Department of Accounting

Date Written: March 28, 2019

Abstract

We find that the likelihood that a firm voluntarily provides an earnings forecast is sensitive to the extent to which other firms in the same geographic area provide earnings forecasts. This geographic peer effect in forecasting is stronger for firms owned by more local institutional investors, and when firms do forecast, liquidity improves more when a larger fraction of their geographic peers forecast. Further, we use instrumental variable techniques to help alleviate the concern that these geographic peer effects are driven by omitted local economic factors that can lead firms to make similar disclosure decisions. Overall, our findings suggest that geographic peer effects in disclosure choices arise in part due to firms trying to avoid negative capital market effects induced by local investors.

Keywords: Disclosure, Earnings forecasts, Peer effects, Geography, Local investors

JEL Classification: M40, M41

Suggested Citation

Matsumoto, Dawn and Serfling, Matthew and Shaikh, Sarah, Geographic Peer Effects in Management Earnings Forecasts (March 28, 2019). Available at SSRN: https://ssrn.com/abstract=3025002 or http://dx.doi.org/10.2139/ssrn.3025002

Dawn Matsumoto

University of Washington - Department of Accounting ( email )

224 Mackenzie Hall, Box 353200
Seattle, WA 98195-3200
United States
206-543-4454 (Phone)
206-685-9392 (Fax)

Matthew Serfling (Contact Author)

University of Tennessee ( email )

Haslam College of Business
Knoxville, TN 37996
United States
865-974-1952 (Phone)

Sarah Shaikh

University of Washington - Department of Accounting ( email )

Seattle, WA WA
United States

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