Geographic Peer Effects in Management Earnings Forecasts

• In Event: Disclosure

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. We use instrumental variable techniques to alleviate the concern that these geographic peer effects are driven by omitted economic factors unique to a local area that lead firms to make similar disclosure decisions. Our findings imply that geographic peer effects in disclosure choices arise in part due to firms trying to avoid negative capital market effects induced by market pressure from local institutional investors. The evidence does not suggest that information sharing among firms plays a key role in generating these geographic peer effects.

Authors

• Dawn Matsumoto, University of Washington

• Matthew Serfling, University of Tennessee

• Sarah Shaikh, University of Washington