Geographic Peer Effects in Management Earnings Forecasts
53 Pages Posted: 25 Aug 2017 Last revised: 31 Mar 2019
Date Written: March 28, 2019
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: Suggested Citation