Managers frequently attribute the news in their earnings forecasts to various economic events. Using textual analysis, we identify the economic factors underlying earnings news from press releases. We document a wide range of industry-wide shocks and firm-specific actions to which the earnings news in management forecasts is attributed. As expected, earnings attributions significantly affect peer firms’ price reactions to the earnings news. Specifically, earnings news attributed to industry-wide trends or firm structural changes leads to positive information transfers but earnings news attributed to firm competitive moves triggers negative information transfers. Information transfers are much stronger when each economic factor is mentioned the first time in a given industry-year. Further analysis reveals that the strength of information transfers varies with firm-level rivalry within the industry (i.e., similar business strategies, market position, and level of competition).
ASJC Scopus subject areas
- Economics and Econometrics