Is There Information Content in Information Acquisition?

61 Pages Posted: 14 Apr 2019

See all articles by Michael S. Drake

Michael S. Drake

Brigham Young University - Marriott School

Bret A. Johnson

George Mason University - Department of Accounting

Darren T. Roulstone

Ohio State University (OSU) - Fisher College of Business

Jacob R. Thornock

Brigham Young University

Date Written: March 1, 2019

Abstract

In this study, we examine whether investors’ actions to acquire accounting information are predictive of future firm performance because these actions partially reveal investors’ private expectations of this performance. Using a database of EDGAR downloads, we find some evidence that information acquisition of accounting reports by EDGAR users is, on average, predictive of future firm performance. We then determine the identity of the EDGAR user and examine whether different users’ private expectations will be relatively more predictive of subsequent performance. We find that the information acquisition activities of more sophisticated institutional users (e.g., hedge funds, investment banks) are more strongly associated with future performance than are those of less sophisticated retail users. Finally, we find that information acquisition by sophisticated institutions is a leading indicator of their equity holdings. In summary, this study provides evidence of predictive information embedded in sophisticated investors’ actions to acquire accounting information.

Keywords: Information Acquisition, Investor Expectations, Sophisticated Traders, EDGAR

Suggested Citation

Drake, Michael S. and Johnson, Bret A. and Roulstone, Darren T. and Thornock, Jacob, Is There Information Content in Information Acquisition? (March 1, 2019). Available at SSRN: https://ssrn.com/abstract=3356055 or http://dx.doi.org/10.2139/ssrn.3356055

Michael S. Drake (Contact Author)

Brigham Young University - Marriott School ( email )

United States

Bret A. Johnson

George Mason University - Department of Accounting ( email )

Fairfax, VA
United States
703-993-8185 (Phone)

Darren T. Roulstone

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Jacob Thornock

Brigham Young University ( email )

Provo, UT 84602
United States
8014220828 (Phone)

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