Access the full text.
Sign up today, get DeepDyve free for 14 days.
CSA Cheng, JD Eshleman (2012)
Does the market over- or underreact to customer earnings announcements?
Shailendra Pandit, Charles Wasley, Tzachi Zach (2010)
Information Externalities Along the Supply Chain: The Economic Determinants of Suppliers’ Stock Price Reaction to Their Customers’ Earnings AnnouncementsUniversity of Illinois at Chicago College of Business Administration Research Paper Series
(2012)
Does the market over- or underreact to customer earnings announcements?. Louisiana State University, A working paper
(2009)
Do financial analysts use supply chain information in revising their earnings forecasts
PN Patatoukas (2012)
Customer-base concentration: implications for firm performance and capital marketsAccount Rev, 87
Panos Patatoukas (2011)
Customer-Base Concentration: Implications for Firm Performance and Capital MarketsMarketing Science eJournal
Youngin Pyo, Steven Lustgarten (1990)
Differential intra-industry information transfer associated with management earnings forecastsJournal of Accounting and Economics, 13
Ian Gow, G. Ormazabal, Daniel Taylor (2009)
Correcting for Cross-Sectional and Time-Series Dependence in Accounting ResearchManagerial Accounting
(2009)
Estimating standard errors in finance panel data sets: comparing approaches
C. Fee, Charles Hadlock, Shawn Thomas (2005)
Corporate Equity Ownership and the Governance of Product Market RelationshipsERN: Governance & Ownership (Topic)
Jacob Thomas, F. Zhang (2007)
Overreaction to Intra-Industry Information Transfers?Behavioral & Experimental Finance eJournal
Lauren Cohen, Andrea Frazzini (2007)
Economic Links and Predictable ReturnsSPGMI: Compustat Fundamentals (Topic)
Jerry Han, J. Wild (1997)
Timeliness of Reporting and Earnings Information TransfersJournal of Business Finance & Accounting, 24
CE Fee, S Thomas (2004)
Sources of gains in horizontal mergers: evidence from customer, supplier, and rival firmsJ Finance Econ, 74
D. Morelli (2012)
Security returns, beta, size, and book-to-market equity: evidence from the Shanghai A-share marketReview of Quantitative Finance and Accounting, 38
D. Collins, S. Kothari (1989)
An analysis of intertemporal and cross-sectional determinants of earnings response coefficientsJournal of Accounting and Economics, 11
Sundaresh Ramnath (2002)
Investor and Analyst Reactions to Earnings Announcements of Related Firms: An Empirical AnalysisJournal of Accounting Research, 40
M. Firth (1996)
The transmission of corporate financial information across national borders and equity market linkagesReview of Accounting Studies, 1
J. Dietrich (2011)
Discussion of “Information Externalities along the Supply Chain: The Economic Determinants of Suppliers’ Stock Price Reaction to Their Customers’ Earnings Announcements”*Contemporary Accounting Research, 28
Vivek Sharma (2011)
Stock returns and product market competition: beyond industry concentrationReview of Quantitative Finance and Accounting, 37
Santhosh Ramalingegowda, Tao Shu, P. Yeung (2011)
Moderated Confidence and Under- and Overreactions to Related Firm's NewsBehavioral & Experimental Finance eJournal
J Thomas, FX Zhang (2008)
Overreaction to intra-industry information transfers?J Account Res, 46
Peter Easton, M. Zmijewski (1989)
Cross-sectional variation in the stock market response to accounting earnings announcements☆Journal of Accounting and Economics, 11
M. Firth (1976)
The Impact of Earnings Announcements on the Share Price Behaviour of Similar Type FirmsThe Economic Journal, 86
MG Hertzel, Z Li, MS Officer, KJ Rodgers (2008)
Inter-firm linkages and the wealth effects of financial distress along the supply chainJ Finance Econ, 87
M. Hertzel, Micah Officer, Zhi Li, K. Cornaggia (2008)
Inter-Firm Linkages and the Wealth Effects of Financial Distress Along the Supply ChainCorporate Finance: Valuation
C. Olsen, J. Dietrich (1985)
Vertical Information Transfers: The Association between Retailers' Sales Announcements and Suppliers' Security ReturnsJournal of Accounting Research, 23
Yongtae Kim, M. Lacina, M. Park (2008)
Positive and Negative Information Transfers from Management ForecastsJournal of Accounting Research, 46
T. Wong, S. Teoh (1993)
Perceived Auditor Quality and the Earnings Response CoefficientAccounting review: A quarterly journal of the American Accounting Association, 68
(2010)
Wal-mart squeezes costs from supply chain
Jerry Han, J. Wild, K. Ramesh (1989)
Managers' earnings forecasts and intra-industry information transfersJournal of Accounting and Economics, 11
ID Gow, G Ormazabal, DJ Taylor (2010)
Correcting for cross-sectional and time-series dependence in accounting researchAccount Rev, 85
Kai Hui, Sandy Klasa, P. Yeung (2011)
Corporate Suppliers and Customers and Accounting ConservatismAuditing
E. Fama, K. French (1997)
Industry costs of equityJournal of Financial Economics, 43
R. Freeman, Senyo Tse (1992)
An earnings prediction approach to examining intercompany information transfersJournal of Accounting and Economics, 15
George Foster (1981)
Intra-industry information transfers associated with earnings releasesJournal of Accounting and Economics, 3
C. Fee, Shawn Thomas (2003)
Sources of Gains in Horizontal Mergers: Evidence from Customer, Supplier, and Rival FirmsCorporate Finance: Governance
Linna Shi, Huai Zhang (2010)
Can the earnings fixation hypothesis explain the accrual anomaly?Review of Accounting Studies, 17
Stephen Baginski (1987)
Intraindustry Information Transfers Associated With Management Forecasts Of EarningsJournal of Accounting Research, 25
G. Yen, Cheng-Few Lee (2008)
Efficient Market Hypothesis (EMH): Past, Present and FutureReview of Pacific Basin Financial Markets and Policies, 11
In this paper we examine whether the quarterly earnings announcements of supplier firms contain information about their customer’s earnings. Our evidence suggests that they do. Specifically, we find evidence consistent with the market impounding supplier firm earnings information into the stock prices of the firm’s customers. This is consistent with the market using the supplier’s earnings to help assess the customer firm’s future cash flows and/or uncertainty of those cash flows. We also find that the quality of the earnings influences the magnitude of the customer firm’s stock price reaction. The customer’s stock price reaction is increasing in the revenue growth reported by the supplier and the past persistence of the supplier’s earnings. Additional tests reveal that the market reaction is amplified when the customer firm is more dependent on the supplier. Finally, we find that the relative bargaining power of the customer influences the market reaction to supplier earnings. While prior research has documented that the market uses industry peer earnings and customer earnings in pricing a firm’s stock, this is the first study to provide evidence on the market’s use of supplier earnings information.
Review of Quantitative Finance and Accounting – Springer Journals
Published: Apr 19, 2013
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.