Abstract
The authors examine whether herd activity promotes the efficient pricing of value-relevant information conveyed by annual earnings announcements. Using a global panel sample representing 35 countries, they find that price informativeness increases with herding effects around the time of the earnings disclosure. In addition, the positive herding-informativeness relationship is greater in countries with stronger legal systems and stronger political regimes. A series of robustness tests confirm these relationships. The study findings demonstrate that the tendency to herd plays a beneficial role in expediting information dissemination and reducing trader disagreement. This implies that this positive association is probably driven by the presence of investigative herding.
| Original language | English |
|---|---|
| Pages (from-to) | 92-110 |
| Number of pages | 19 |
| Journal | Journal of Behavioral Finance |
| Volume | 25 |
| Issue number | 1 |
| Early online date | 27 Jul 2022 |
| DOIs | |
| Publication status | Published - 2024 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2022 The Institute of Behavioral Finance.
Funding
Tao acknowledges financial support from the Multi-Year Research Grant (MYRG2020-00042-FBA) at the University of Macau. All errors are our own.
Keywords
- Earnings announcements
- Information dissemination
- Investigative herding
- Legal systems
- Political regimes
- Trader disagreement