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 journalArticlepeer-review

41 Citations (Scopus)

Abstract

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
Volume17
Issue number2
DOIs
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

Fingerprint

Dive into the research topics of 'Investor protection and price informativeness about future earnings: International evidence'. Together they form a unique fingerprint.

Cite this