Does the market overweight imprecise information? Evidence from customer earnings announcements

• 成果类型: Article
• 署名作者: Cheng, C. S. Agnes; Eshleman, John Daniel
• 署名单位: Hong Kong Polytechnic University; Oklahoma State University System; Oklahoma State University - Stillwater
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-014-9293-8
• 发表日期: 2014
• 页码: 1125-1151
• 关键词: stock; investor; transfers; returns; determinants; disclosure; attention; forecasts; BEHAVIOR; COSTS

摘要

We examine how supplier-firm shareholders respond to the earnings announcements of their major customers to test the moderated confidence hypothesis, which predicts overreaction to imprecise signals. In our setting, the moderated confidence hypothesis predicts that supplier shareholders will overreact to customer earnings news because that news contains imprecise information about the suppliers' future cash flows. We find evidence that supplier earnings announcement abnormal returns are negatively correlated with supplier abnormal returns at the earlier customers' earnings announcements, consistent with supplier overreaction. We also find evidence that the overreaction declines with the strength of the economic ties between the supplier and the customer.