Does Business Strategy Impact a Firm’s Information Environment?

2017 ◽  
Vol 34 (4) ◽  
pp. 563-587 ◽  
Author(s):  
Kathleen A. Bentley-Goode ◽  
Thomas C. Omer ◽  
Brady J. Twedt
Keyword(s):  
Information Asymmetry ◽  
Business Strategy ◽  
Information Environment ◽  
External Information ◽  
Growth Options ◽  
Earnings Guidance ◽  
Press Releases ◽  
Voluntary Disclosures ◽  
Information Intermediaries ◽  
External Sources

This study examines whether a firm’s business strategy affects their information environment. Organizational theory suggests that firms following an innovative “prospector” strategy have greater incentives to provide more frequent voluntary disclosures than firms following an efficient “defender” strategy. Furthermore, prospectors are more likely to attract greater coverage by external information intermediaries. We find that prospectors engage in more frequent management earnings guidance, issue more press releases, and are followed by more financial analysts compared with defenders. Next, we examine the association between business strategy and information asymmetry. We find that despite prospectors having attributes associated with information asymmetry (e.g., R&D, growth options), prospectors have lower information asymmetry than defenders. We attribute this finding to prospectors’ greater access to both internal and external sources of disclosure compared with defender firms, which we confirm using mediation analysis. Collectively, our results suggest that business strategy does affect firms’ information environments, incremental to known determinants, and that strategy serves as a useful context for understanding a firm’s underlying information environment.

scholarly journals Modeling Changes in the Enterprise Information Capital in the Digital Economy

2021 ◽  
Vol 7 (3) ◽  
pp. 166
Author(s):  
Dmitriy Rodionov ◽  
Andrey Zaytsev ◽  
Evgeniy Konnikov ◽  
Nikolay Dmitriev ◽  
Yulia Dubolazova
Keyword(s):  
External Environment ◽  
Electronic Version ◽  
Social Processes ◽  
Information Environment ◽  
External Information ◽  
Digital Information ◽  
Information Analysis ◽  
Enterprise Information ◽  
Attractor Model ◽  
The Stability

The global COVID-19 pandemic has led to the self-isolation of people and the transformation of many economic and social processes into an electronic version thus contributing to the digitalization of all spheres. Being part of this environment, enterprises generate information resources to develop their desired image, which may vary according to the factors characterizing the information environment. Information capital is a comprehensive characteristic of an enterprise and determines its effectiveness and sustainability. The purpose of this study is to develop a toolkit that allows one to assess the information capital of an enterprise, reflecting its perception within the digital information environment. It is necessary to develop the methodology for the formation of such tools. As a result, a fuzzy-plural approach has been developed to evaluate the index of external information capital. This model allows us to assess the external information capital and to simulate its changes caused by various kinds of information events. The study of key elements, for example, the stability and tonality indices, index of target perception made it possible to systematize chaotic changes in the external environment and describe them using the Chen–Lee attractor model. The results of this study can be useful for researchers in the field of digital information analysis, in particular for the comparative analysis of enterprises and the assessment of their information capital.

scholarly journals Disclosure Frequency, Information Environment, and Cost of Capital under Regulation Fair Disclosure in the Korean Market

2020 ◽  
Vol 12 (14) ◽  
pp. 5856
Author(s):  
Hoshik Shim
Keyword(s):  
Emerging Markets ◽  
Information Asymmetry ◽  
Information Leakage ◽  
Equity Capital ◽  
Information Environment ◽  
Price Ratio ◽  
Corporate Disclosure ◽  
Regulation Fair Disclosure ◽  
Fair Disclosure ◽  
Korean Market

Disclosure policy contributes to improve sustainable corporate information environment by mitigating information asymmetry surrounding companies. Economic theories generally support that more disclosures reduce the level of information asymmetry, increase stock liquidity, and thus decrease the costs of equity capital. However, the effect of corporate disclosure in emerging markets is not clearly predictable because of the potential information leakage prior to disclosure. Considering this issue, this study focuses on the Regulation Fair Disclosure which prohibits selective disclosure. Using the earnings-to-price ratio as a proxy of the costs of equity, the study finds that disclosure frequency is negatively related to the cost of equity capital. However, I do not find evidence that disclosure is negatively related to the implied costs of equity capital (ICOE). The results of the quintile analysis suggest that this inconsistency is attributable to the better information environment of the ICOE sample. The findings of this study have implications for disclosure regulations in emerging markets, given that the existing literature casts doubt on the effectiveness of corporate disclosure in such markets.

scholarly journals Communication for Coproduction: Increasing Information Credibility to Fight the Coronavirus

2020 ◽  
Vol 50 (6-7) ◽  
pp. 692-697 ◽  
Author(s):  
Huafang Li
Keyword(s):  
Health Outcomes ◽  
Information Asymmetry ◽  
Information Needs ◽  
Public Trust ◽  
Health Policies ◽  
Information Asymmetries ◽  
Information Intermediaries ◽  
Information Credibility ◽  
Different Types ◽  
Credible Information

Governments and citizens need to work together to fight and win the war against the coronavirus and coproduce better health outcomes. However, information asymmetries exist between the two parties and influence coproduction adversely. Effective communication by satisfying different types of citizens’ information needs can reduce the degree of information asymmetry and improve coproduction. When citizens distrust governments, governments can use credible information intermediaries, such as experts and volunteers, to increase information credibility. Increasing information credibility could further reduce information asymmetry, increase public trust, and motivate citizens to comply with health policies and coproduce better health outcomes.

scholarly journals Informing Protected Area Decision Making through Academic-Practitioner Collaborations

Land ◽  
2020 ◽  
Vol 9 (10) ◽  
pp. 375
Author(s):  
Grant Murray ◽  
Carleigh Randall ◽  
Rick Rollins
Keyword(s):  
Information Sources ◽  
External Information ◽  
Knowledge Mobilization ◽  
Management Guidelines ◽  
Academic Researchers ◽  
External Sources ◽  
On Line ◽  
Line Survey ◽  
Provincial Park

This study examined knowledge mobilization and collaboration practices of practitioners in a Canadian provincial park agency, BC Parks. Data was collected through four focus groups, an on line survey (N = 125), and a follow up workshop. Results showed that the most important information sources used by the agency were “internal” (e.g., policy and management guidelines), while “external sources” such as academic researchers or journals were rated lower. However, those who collaborated with outside groups, including academics, and those working in a science capacity within the agency, rated external information sources more positively. Barriers and enabling conditions for effective knowledge mobilization were identified.

Signaling Under Threat: Evidence of Voluntary Disclosure in Contested Takeovers

2020 ◽  
pp. 0148558X2096781
Author(s):  
Gerald J. Lobo ◽  
Kangzhen Xie ◽  
Claire J. Yan
Keyword(s):  
Propensity Score ◽  
Information Asymmetry ◽  
Propensity Score Matching ◽  
Voluntary Disclosure ◽  
Bargaining Power ◽  
Economic Consequences ◽  
Good News ◽  
Earnings Guidance ◽  
Difference In Differences ◽  
Target Management

We investigate voluntary disclosure strategies in contested takeovers and the associated economic consequences. Using a difference-in-differences research design and propensity score matching, we find that, relative to friendly takeovers, target management in contested takeovers provides more earnings guidance and conveys more good news during the takeover. Moreover, voluntary disclosure helps contested targets negotiate a better offer, and the results are stronger for targets with more information asymmetry. Collectively, targets adopt voluntary disclosure and alter their strategies under the threat of contested takeover to enhance their bargaining power. Voluntary disclosure by contested targets serves as a negotiation tactic that potentially benefits target shareholders.

A third dimension to understanding voluntary disclosures

2013 ◽  
Vol 34 (4) ◽  
pp. 48-54
Author(s):  
John Ben Prince ◽  
Neeraj Dwivedi
Keyword(s):  
Corporate Governance ◽  
Information Asymmetry ◽  
Agency Theory ◽  
Design Methodology ◽  
Voluntary Disclosures ◽  
Content Type ◽  
Strategic Actions ◽  
Third Dimension ◽  
Key Aspects

PurposeThe purpose of this paper is to establish sufficient potential for a novel perspective that could enhance understanding of the rationale behind voluntary disclosures. In this paper, the authors seek to provide an integrated view from different disciplines that points to a new dimension. This dimension is expected to promote a better understanding of voluntary disclosures in corporate governance.Design/methodology/approachThe authors use the conceptual underpinnings of agency theory and integrate several perspectives from different disciplines. Through the support of simple matrices and a conceptual figure, an interesting finding is proposed that could help provide a new way of looking at voluntary disclosures.FindingsThe established view holds that due to information asymmetry between the shareholders and the management, voluntary disclosures are more meaningful for the shareholders of the firm. The authors, however, suggest that since information asymmetry is already embedded in several roles and strategic actions of the board, it leads to the development of a third dimension in understanding voluntary disclosures.Originality/valueInformation asymmetry has been well understood as one of the key aspects of the agency theory. The authors' strive to apply this phenomenon while looking at the roles of the board and the strategic actions that result therein. The result is an enhanced understanding of the motivations behind voluntary disclosures.

Voluntary disclosures and market response to earnings announcements

2018 ◽  
Vol 17 (1) ◽  
pp. 2-17 ◽  
Author(s):  
Guy Dinesh Fernando ◽  
Justin Giboney ◽  
Richard A. Schneible
Keyword(s):  
Information Asymmetry ◽  
Stock Returns ◽  
Information Content ◽  
Voluntary Disclosure ◽  
Stock Price ◽  
Trading Volume ◽  
Voluntary Disclosures ◽  
Release Date ◽  
Price Movement ◽  
Content Type

Purpose The aim of this paper is to investigate the impact of voluntary disclosure on information asymmetry between investors and the average information content of subsequent the earnings announcement. Design/methodology/approach The authors use empirical methodology relying on multiple regression analyses. The authors estimate models of trading volume and stock returns around the earnings’ release date as a function of voluntary disclosures, measured using information in the 8-K statements. Findings Voluntary disclosures prior to the earnings release date increase trading volume related to stock returns. In addition, voluntary disclosures also reduce stock price movement around that date. Research limitations/implications The results indicate that voluntary disclosures increase trading volume related to stock returns around the earnings release date. Such increases indicate increased differential precision among investors, demonstrating that voluntary disclosures increase differences in opinion among investors. The reduced stock price movement around the earnings release date also show that voluntary disclosures reduce the information content of earnings. One limitation is that the measure of voluntary disclosures does not consider the variation in the information content of individual disclosures. Practical implications Firms who make voluntary disclosures will need to carefully consider how to structure such releases to minimize asymmetry between investors. Investors should pay greater attention to finding out, and interpreting, voluntary disclosures by firms. Social implications Regulators have previously expressed concern about leveling the playing field between more and less informed investors. The results showing increased differences in information as a result of voluntary disclosures provide valuable insights as regulators debate the balance of mandated and voluntary disclosure. Originality/value This is the first study to investigate the effect of voluntary disclosures on information asymmetry among investors using trading volume and, consequently, the first to find increased differences among investors that result from those voluntary disclosures. The paper is also the first to use a direct measure of voluntary disclosure developed by Cooper et al. to demonstrate the negative relation between voluntary disclosure and the average informativeness of earnings announcements.

Do financial blogs serve an infomediary role in capital markets?

2016 ◽  
Vol 31 (1) ◽  
pp. 17-40 ◽  
Author(s):  
Laura K. Rickett
Keyword(s):  
New Media ◽  
Information Asymmetry ◽  
Capital Markets ◽  
Earnings Quality ◽  
Abnormal Returns ◽  
Information Environment ◽  
Economic Uncertainty ◽  
Market Conditions ◽  
Content Type ◽  
Retail Investors

Purpose – Financial blogs provide an online platform whereby retail investors effortlessly gain access to an abundant array of investment guidance. Prior studies find that the market reacts to financial blogs and similar online venues but results are inconsistent and financial blogs, a growing area in new media and distinct from other online venues, have received little attention. The purpose of this paper is to examine the particular conditions in which financial blogs serve an infomediary role in capital markets; when information asymmetry is high, earnings quality is low, and during economic uncertainty. These are conditions in which retail investors may seek easily accessible advice for their investment decisions. Design/methodology/approach – Abnormal returns for firms mentioned in blog posts on the SeekingAlpha.com financial blog are examined using a multivariate regression to determine whether or not the market reaction associated with these posts is related to information asymmetry, earnings quality, and economic uncertainty. Findings – Results indicate that abnormal returns are associated with the SeekingAlpha.com financial blog when information asymmetry is high and during bearish market conditions, and in particular when buy recommendations are posted on the blog for firms with high information asymmetry. This association is strengthened for firms with low institutional ownership, a proxy for unsophisticated or retail investors. Research limitations/implications – Results are based on a sample collected during a specific time period in order to detect whether financial blogs serve an infomediary role during uncertain market conditions. Practical implications – Results of this study can be useful to company executives who may want to monitor investment advice posted about their firm on financial blogs. Financial blogs and other forms of social media such as Twitter and Facebook are becoming the “new normal” in the investor information environment, a trend that is likely to continue. Originality/value – Financial blogs provide an abundance of supplemental information demanded by investors. Financial blogs represent a form of “new media,” now considered a key component of firms’ information environment (Saxton, 2012). In contrast to prior studies which primarily investigate only whether the market reacts to financial blogs or similar online platforms such as stock message boards, this study attempts to understand the specific conditions in which the market reacts to financial blogs. The results provide a rationale as to when and why investors rely on financial blogs and whether financial blogs serve an infomediary role in capital markets.

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