Brady J. Twedt

The Media and Mispricing: The Role of the Business Press in the Pricing of Accounting Information

This study investigates the role of the business press in the pricing of accounting information. Using a comprehensive dataset of more than 111,000 earnings-related business press articles published from 2000–2010, we find that press coverage of the annual earnings announcement mitigates cash flow mispricing, but has a negligible effect on accrual mispricing. We provide evidence that this impact is driven primarily by the press disseminating the information more broadly, rather than by the creation of new content that helps investors understand the implications of accounting information. Our results suggest that the business press plays an important role in facilitating the market’s ability to efficiently impound accounting information into stock prices and provide new insights into the role of the business press as an information intermediary in capital markets.

Fraud score analysis in emerging markets

Purpose – The purpose of this research is to determine the likelihood of financial statement manipulations in companies throughout a variety of emerging market countries and compare this potential wirh that of firms within the USA.Design/methodology/approach – The authors utilize the Fraud Score Model, as set forth by Dechow et al., to determine the likelihood of financial statement manipulations. By adjusting their model to work in an international setting, the authors are able to study nine industries across 23 countries, including the USA.Findings – The results vary from industry to industry, with some countries performing extremely well in one industry, only to prove remarkably risky in the next.Originality/value – The findings may be used by a variety of market participants, especially investors, to determine the risk levels of potential foreign investments. Therefore, this research can help lead to a more overall efficient placement of global capital.

The People in Your Neighborhood: Evidence of Local Information Leakage Around Corporate Headquarters When Insiders Trade

This study adds to the literature on the existence of information asymmetries in financial markets by investigating whether information leakage occurs in the local geographic area surrounding corporate headquarters at the time of nonpublic corporate events. On days when a corporation’s headquarters city is the top location for Google searches for company-specific financial information, we find that insider selling is positively associated with the volume of Google search. This result is consistent with information leakage in close proximity to corporate headquarters before news of insider selling is public. In addition, we find that insider selling is negatively associated with Google search volume when the top search location is away from corporate headquarters, consistent with insiders avoiding selling shares around public information events. We also find more negative future abnormal returns when local information search is high at the time of insider selling. Collectively, our results provide evidence consistent with a local information advantage near corporate headquarters when insiders sell their shares.

Analyst Forecast Bundling

Changing economic conditions over the past two decades have created incentives for sell-side analysts to both provide their institutional clients tiered services and to streamline their written res...