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Stock Price Response to Accounting Information in Oligopoly

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  • Joh, Gun-Ho
  • Lee, Chi-Wen Jevons

Abstract

In this article, the authors explore the linkages between the Ball-Brown effect and the information transfer effect in oligopoly. Using the data from the Wall Street Journal's "Digest of Earnings Report" column, they analyze how the stock market reacts to the subearnings information. The authors show that an unexpected increase in sales is good news to the disclosing firm as well as to its competitors. However, an unexpected increase in costs is bad news to the disclosing firm but good news to its competitors. The Ball-Brown effect can be viewed as a consequence of stock market reactions to subearnings disclosure. Copyright 1992 by University of Chicago Press.

Suggested Citation

  • Joh, Gun-Ho & Lee, Chi-Wen Jevons, 1992. "Stock Price Response to Accounting Information in Oligopoly," The Journal of Business, University of Chicago Press, vol. 65(3), pages 451-472, July.
    • Handle: RePEc:ucp:jnlbus:v:65:y:1992:i:3:p:451-72
    DOI: 10.1086/296579
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    Cited by:

    1. Henry L. Friedman & John S. Hughes & Richard Saouma, 2016. "Implications of biased reporting: conservative and liberal accounting policies in oligopolies," Review of Accounting Studies, Springer, vol. 21(1), pages 251-279, March.
    2. Mark Lang & Russell Lundholm, 1996. "The Relation Between Security Returns, Firm Earnings, and Industry Earnings," Contemporary Accounting Research, John Wiley & Sons, vol. 13(2), pages 607-629, September.
    3. Cameron, Ken & Schnusenberg, Oliver, 2009. "Oil prices, SUVs, and Iraq: An investigation of automobile manufacturer oil price sensitivity," Energy Economics, Elsevier, vol. 31(3), pages 375-381, May.
    4. Paulo Alves & Peter Pope & Steven Young, 2009. "Cross‐border information transfers: Evidence from profit warnings issued by European firms," Accounting and Business Research, Taylor & Francis Journals, vol. 39(5), pages 449-472.

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