Intra-Industry Information Transfers: An Analysis of Confirmatory and Contradictory Earnings News

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Prior research on intraindustry information transfers finds that earnings announcements are information events not only for the announcing firm but also for others in the industry. This paper investigates whether the informativeness of a firm’s earnings surprise is conditional on the nature of the earnings news previously announced by other firms in the industry. I find that the market assigns a confirmation premium to nonnegative earnings surprises that confirm earlier earnings news but that no such effect emerges for confirmatory earnings with negative surprises. Further analysis also reveals that confirmatory earnings with nonnegative (negative) surprises are more (less) persistent than earnings with contradictory surprises. While the presence of a confirmation premium for confirmatory nonnegative earnings surprises appears to be a rational response to their greater persistence, the market does not seem to recognize the lower persistence of confirmatory negative earnings surprises.


Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure


American Accounting Association Annual Meeting

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Washington, DC, USA