Information Transfers among Group-Affiliated Firms

Abstract

ABSTRACT
This study examines intra-group information transfers associated with quarterly earnings announcements. Specifically, the objectives of this paper are to investigate whether there is positive information transfers among group-affiliated firms, and to examine how the affiliate’s operating strategy affect the extent of information transfers.
The sample includes 615 quarterly earnings releases by firms listed in Taiwan Stock Exchange between 1988 and 1997. The empirical results provide evidence of positive information transfers between affiliated firms associated with quarterly earnings announcements. In addition, the extent of information transfer is dependent on the diversification strategies of the group affiliates. When industry covariation in firms' returns is removed, directional information transfers remain significant.

Keywords: Group-affiliated Firms, Information Transfer, Quarterly Earnings Announcement, Market model, Two-index Model