TY - JOUR
T1 - Overreaction or Underreaction to Intra-Industry Earnings Information Transfer
T2 - A Cross-Country Analysis
AU - Agnes Cheng, C. S.
AU - Fang, Jing
AU - Huang, Yuan
AU - Zhong, Yuxiang
N1 - Funding Information:
C. S. Agnes Cheng acknowledges financial support from the General Research Fund of the Research Grant Council, the Government of the Hong Kong Special Administrative Region (Project no. 15500714/B-Q41S). Yuxiang Zhong acknowledges financial support from the Fundamental Research Funds for the Central University, HUST(2021WKYXQN002). Yuxiang Zhong is the corresponding author.
Funding Information:
C. S. Agnes Cheng acknowledges financial support from the General Research Fund of the Research Grant Council, the Government of the Hong Kong Special Administrative Region (Project no. 15500714/B-Q41S). Yuxiang Zhong acknowledges financial support from the Fundamental Research Funds for the Central University, HUST(2021WKYXQN002). Yuxiang Zhong is the corresponding author. C. S. Agnes Cheng, The University of Oklahoma, Price College of Business, John T. Steed School of Accounting, Norman, OK, USA; Jing Fang and Yuan Huang, The Hong Kong Polytechnic University, Faculty of Business, School of Accounting and Finance, Kowloon, Hong Kong, China; Yuxiang Zhong, Huazhong University of Science and Technology, School of Management, Department of Accounting, Wuhan, China.
Publisher Copyright:
© 2022, American Accounting Association. All rights reserved.
PY - 2022/3/1
Y1 - 2022/3/1
N2 - We apply the moderated confidence hypothesis (MCH) to investigate overreaction and underreaction in intra-industry earnings information transfers in an international setting. MCH predicts that late announcing firms’ investors overreact (underreact) to early announcing industry peers’ earnings news when early announcing peers’ earnings news is imprecise (precise) signals of late announcing firms’ earnings. Consistent with this notion, we find that late announcing firms’ investors overreact to early announcing peers’ earnings news in a large sample of international firms. To the extent that the country-level information environment and culture share the precision of peers’ earnings as signals of each other’s earnings, we find that late announcing firms’ investors are more likely to underreact in countries with a richer information environment, are more likely to overreact in countries with higher individualism, and are less likely to overreact in countries with higher uncertainty avoidance.
AB - We apply the moderated confidence hypothesis (MCH) to investigate overreaction and underreaction in intra-industry earnings information transfers in an international setting. MCH predicts that late announcing firms’ investors overreact (underreact) to early announcing industry peers’ earnings news when early announcing peers’ earnings news is imprecise (precise) signals of late announcing firms’ earnings. Consistent with this notion, we find that late announcing firms’ investors overreact to early announcing peers’ earnings news in a large sample of international firms. To the extent that the country-level information environment and culture share the precision of peers’ earnings as signals of each other’s earnings, we find that late announcing firms’ investors are more likely to underreact in countries with a richer information environment, are more likely to overreact in countries with higher individualism, and are less likely to overreact in countries with higher uncertainty avoidance.
KW - information environment
KW - information transfer
KW - moderated confidence hypothesis
KW - national culture
UR - http://www.scopus.com/inward/record.url?scp=85134630255&partnerID=8YFLogxK
U2 - 10.2308/JIAR-2021-086
DO - 10.2308/JIAR-2021-086
M3 - Journal article
AN - SCOPUS:85134630255
SN - 1542-6297
VL - 21
SP - 1
EP - 21
JO - Journal of International Accounting Research
JF - Journal of International Accounting Research
IS - 1
ER -