We examine whether firms use social media to strategically disseminate financial information. Analyzing S&P 1500 firms' use of Twitter to disseminate quarterly earnings announcements, we find that firms are less likely to disseminate when the news is bad and when the magnitude of the bad news is worse, consistent with strategic behavior. Furthermore, firms tend to send fewer earnings announcement tweets and “rehash” tweets when the news is bad. Cross-sectional analyses suggest that incentives for strategic dissemination are higher for firms with a lower level of investor sophistication and firms with a larger social media audience. We also find that strategic dissemination behavior is detectable in high litigation risk firms, but not low litigation risk firms. Finally, we find that the tweeting of bad news and the subsequent retweeting of that news by a firm's followers are associated with more negative news articles written about the firm by the traditional media, highlighting a potential downside to Twitter dissemination. JEL Classifications: G14; G38; M10; M21; M41.
This paper investigates whether accounting standards harmonization enhances the comparability of financial information across countries. I hypothesize that a firm yet to announce earnings reacts more strongly to the earnings announcement of a foreign firm when both report under the same rather than different accounting standards. My analysis of abnormal price reactions for a global sample of firms supports the prediction. Next, in an attempt to control for the underlying economic comparability and the effects of changes in reporting quality, I use a difference-in-differences design around the mandatory introduction of International Financial Reporting Standards. I find that mandatory adopters experience a significant increase in market reactions to the release of earnings by voluntary adopters compared to the period preceding mandatory adoption. This increase is not observed for nonadopters. Taken together, the results show that accounting standards harmonization facilitates transnational information transfer and suggest financial statement comparability as a direct mechanism. AbstractThis study investigates whether harmonization of accounting standards enhances the comparability of …nancial information across countries. First, I statistically de…ne and link comparability to …rm value in a two-…rm, sequential information release framework. I then empirically test the prediction that a …rm yet to announce earnings reacts more strongly to the earnings announcement of a foreign …rm when both report under the same rather than di¤erent accounting standards. My analysis of abnormal price and volume reactions for a global sample of …rms supports this prediction. Next, in an attempt to control for the e¤ects of changes in reporting quality, I use a di¤erence-in-di¤erences design around the mandatory introduction of International Financial Reporting Standards (IFRS). I …nd that mandatory adopters experience a signi…cant increase in market reactions to the release of earnings by voluntary adopters compared to pre-mandatory adoption. This increase is not observed for non-adopters over the same period. Taken together, my study shows that accounting standards harmonization facilitates transnational information transfer, and suggests comparability as a direct mechanism.
This paper examines changes in firms' dividend payouts following an exogenous shock to the information environment. Traditional signaling, agency, and voluntary disclosure models predict that the more is commonly known about a firm and its competitors in the marketplace, the less private information managers will have to reveal themselves via costly signals or cash disbursements. To test these predictions, we analyze the dividend payment behavior for a global sample of firms around the mandatory adoption of IFRS and around the initial enforcement of new insider trading laws. Both events have the potential to improve the general information environment in the economy. We find that following the two events firms are less likely to pay (or increase) cash dividends, but more likely to cut (or stop) such payments. The changes in dividend policy occur around the time of the informational shock and only in countries and for firms subject to the regulatory change. In further analyses we find that the information content of dividends, measured as threeday absolute announcement returns, is lower after the informational events. The findings underscore that firms' payout policies, among other things, depend on the extent of information about all firms in the economy. AbstractThis paper examines changes in firms' dividend payouts following an exogenous shock to the information environment. Traditional signaling, agency, and voluntary disclosure models predict that the more is commonly known about a firm and its competitors in the marketplace, the less private information managers will have to reveal themselves via costly signals or cash disbursements. To test these predictions, we analyze the dividend payment behavior for a global sample of firms around the mandatory adoption of IFRS and around the initial enforcement of new insider trading laws. Both events have the potential to improve the general information environment in the economy. We find that following the two events firms are less likely to pay (or increase) cash dividends, but more likely to cut (or stop) such payments. The changes in dividend policy occur around the time of the informational shock and only in countries and for firms subject to the regulatory change. In further analyses we find that the information content of dividends, measured as three-day absolute announcement returns, is lower after the informational events. The findings underscore that firms' payout policies, among other things, depend on the extent of information about all firms in the economy. JEL classification:G14, G15, G35, K22, M41 with the signal fall below the additional valuation premium from escaping the pooling equilibrium. If the firms' information environment improves, for instance, because firms are required to adopt a more transparent set of accounting standards or existing reporting and disclosure rules are more tightly enforced, outside investors should be better able to assess each individual firm's type a priori. As a result, the expected valuation premium for the ...
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