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Do information releases increase or decrease information asymmetry? New evidence from analyst forecast announcements

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  • Amiram, Dan
  • Owens, Edward
  • Rozenbaum, Oded

Abstract

Prior literature documents that both earnings announcements and management earnings forecasts increase information asymmetry at announcement. In contrast, we predict and document that analyst earnings forecasts decrease information asymmetry at announcement. As expected, this directional contrast is temporary, in that all three information release types lead to a decrease in information asymmetry following the short-window announcement period. Our evidence demonstrates that the direction of the effect of a public information release on announcement-period information asymmetry is determined by how the information contained in the release relates to prior information held by sophisticated and unsophisticated investors, which supports extant disclosure theory.

Suggested Citation

  • Amiram, Dan & Owens, Edward & Rozenbaum, Oded, 2016. "Do information releases increase or decrease information asymmetry? New evidence from analyst forecast announcements," Journal of Accounting and Economics, Elsevier, vol. 62(1), pages 121-138.
    • Handle: RePEc:eee:jaecon:v:62:y:2016:i:1:p:121-138
    DOI: 10.1016/j.jacceco.2016.06.001
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    More about this item

    Keywords

    Information asymmetry; Analyst forecasts;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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