Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/25802
Title: Does the market overweight imprecise information? Evidence from customer earnings announcements
Authors: Cheng, CSA 
Eshleman, JD
Keywords: Information transfers
Mispricing
Price discovery
Supply chain
Issue Date: 2014
Publisher: Springer
Source: Review of accounting studies, 2014, v. 19, no. 3, p. 1125-1151 How to cite?
Journal: Review of accounting studies 
Abstract: We examine how supplier-firm shareholders respond to the earnings announcements of their major customers to test the moderated confidence hypothesis, which predicts overreaction to imprecise signals. In our setting, the moderated confidence hypothesis predicts that supplier shareholders will overreact to customer earnings news because that news contains imprecise information about the suppliers' future cash flows. We find evidence that supplier earnings announcement abnormal returns are negatively correlated with supplier abnormal returns at the earlier customers' earnings announcements, consistent with supplier overreaction. We also find evidence that the overreaction declines with the strength of the economic ties between the supplier and the customer.
URI: http://hdl.handle.net/10397/25802
ISSN: 1380-6653
DOI: 10.1007/s11142-014-9293-8
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