Investor protection and price informativeness about future earnings: International evidence

In Mu Haw*, Bingbing HU, Jay Junghun Lee, Woody Wu

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    63 Citations (Scopus)


    This study draws on the investor protection literature to identify structural factors in a country's information environment that are likely to explain cross-country differences in the extent to which future earnings information is capitalized in current stock returns. Using a sample of 55,900 firm-years from 32 countries, we find that greater financial disclosure, higher quality earnings, and greater information dissemination through news media are associated with stock prices that are more informative about future earnings, whereas strong enforcement of insider trading laws is associated with stock prices that are less informative about future earnings. We also find that, on average, price informativeness about future earnings is greater in countries with strong investor protection. Our results illuminate the importance of structural factors constituting a country's information environment in explaining cross-country variation in price informativeness about future earnings.

    Original languageEnglish
    Pages (from-to)389-419
    Number of pages31
    JournalReview of Accounting Studies
    Issue number2
    Publication statusPublished - Jun 2012

    Scopus Subject Areas

    • Accounting
    • Business, Management and Accounting(all)

    User-Defined Keywords

    • Cross-country study
    • Future earnings response coefficient (FERC)
    • Investor protection institutions
    • Price informativeness
    • Structural factors


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