TY - JOUR
T1 - The effect of earnings surprises on information asymmetry
AU - Brown, Stephen
AU - Hillegeist, Stephen A.
AU - Lo, Kin
N1 - Funding Information:
We appreciate the comments and suggestions by Sudipta Basu, Donal Byard, Jennifer Francis, Soeren Hvidkjaer, Pascal Maenhout, Shamin Mashruwala, Massimo Massa, Steven Monahan, Urs Peyer, K Ramesh and workshop participants at Boston University, CUNY Baruch College, George Washington University, INSEAD, London Business School, Northwestern University, the Securities and Exchange Commission, Singapore Management University, University of Maryland and participants at the 2006 Contemporary Issues in Capital Markets & Financial Economics Conference at the University of Cyprus, the 2007 Accounting Research Conference of the Universities of British Columbia, Oregon, and Washington, and the 2007 American Accounting Association conference (Chicago, IL). We gratefully acknowledge the financial support of INSEAD, the KPMG Research Bureau at UBC, PricewaterhouseCoopers, and the Social Sciences and Humanities Research Council of Canada.
PY - 2009/6
Y1 - 2009/6
N2 - We examine the effect of earnings surprises on changes in information asymmetry. We hypothesize and find that asymmetry is lower (higher) in the quarter following positive (negative) earnings surprises compared to firms that meet the consensus analyst earnings forecast. The relations between earnings surprises and information asymmetry are stronger when the surprises are more likely to capture investors' attention. Examining the source of these changes, we show that decreased information search activities is the most important factor for asymmetry declining after positive surprises; for negative surprises, decreased uninformed trading plays a dominant role increasing asymmetry. Crown
AB - We examine the effect of earnings surprises on changes in information asymmetry. We hypothesize and find that asymmetry is lower (higher) in the quarter following positive (negative) earnings surprises compared to firms that meet the consensus analyst earnings forecast. The relations between earnings surprises and information asymmetry are stronger when the surprises are more likely to capture investors' attention. Examining the source of these changes, we show that decreased information search activities is the most important factor for asymmetry declining after positive surprises; for negative surprises, decreased uninformed trading plays a dominant role increasing asymmetry. Crown
KW - Earnings surprises
KW - Information asymmetry
KW - Investor recognition hypothesis
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U2 - 10.1016/j.jacceco.2008.12.002
DO - 10.1016/j.jacceco.2008.12.002
M3 - Article
AN - SCOPUS:67349181282
SN - 0165-4101
VL - 47
SP - 208
EP - 225
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 3
ER -