The Information Asymmetry between Management and Rank-and-File Employees: Determinants and Consequences

We investigate whether information possessed by rank-and-file employees is incorporated in top managers’ expectations and decisions. Using employees’ predictions of their company’s business outlook from Glassdoor.com to measure the employees’ information set, and using management earnings forecasts to measure management expectations, we show that management expectations incorporate employees’ information only partially. This intrafirm information asymmetry is lower when top managers are more experienced and internally engaged and when employees are more satisfied with senior management, firm culture, and their compensation; and higher in companies that are more decentralized, have internal control weakness, and poorly incentivize their employees. Further analyses suggest that our results are not driven by managers’ strategically choosing not to use employees’ information in their forecasts. Finally, we document that firms with large discrepancies between management forecasts and employee outlook have poorer future performance and a higher likelihood of CEO turnover

The Democratization of Investment Research: Implications for Retail Investor Profitability and Firm Liquidity

We find evidence that crowdsourced investment research facilitates informed trading by retail investors and improves firm liquidity. Specifically, retail order imbalances are strongly correlated with the sentiment of Seeking Alpha articles, and the ability of retail order imbalances to predict returns is roughly twice as large on research article days. In addition, firms with exogenous reductions in Seeking Alpha coverage experience increases in bid-ask spreads and price impact, with the effect being stronger for firms with high retail ownership. Our findings suggest that technological innovations have helped democratize access to investment research with important implications for firm liquidity

Re-Legitimierung der Universität – ein neuer Witz

Osnovno pitanje koje rad pokreće je na koji nam način istraživanje ideje univerziteta omogućuje da danas pred njom otvorimo nove horizonte? Fichteovo, Schleiermacherovo i Humboldtovo inzistiranje na obrani autonomije univerziteta stvorilo je novi problem – sudbinsko vezivanje univerziteta za državu pokazalo se kao preveliko breme. Pritisnut zahtjevima države za proizvođenjem profesionalne kompetencije, u svijetu koji je sve više insistirao na administrativnoj i privrednoj funkcionalnosti i efikasnosti, univerzitet se sve više udaljavao od svojih modernih prosvjetiteljsko-humanističkih okvira, odnosno, od proklamirane emancipatorske uloge znanja. Međutim, on je jednako bio žrtvom visoko podignutog tona kojim je bio praćen govor filozofa njemačkog idealizma. Univerzitet tako biva razapet između znanosti, nacije i države. Ideja univerziteta se time pretvorila u ideologiju univerziteta. Dijagnoza je glasila da je univerzitet ostao bez svoje ideje. Tako se danas odgovor na pitanje ima li ideja univerziteta još uvijek snagu legitimizacije same institucije, kod Habermasa, Lyotarda i Derridaa, poklapa s pokušajem »buđenja« samih živih aktera univerziteta, profesora i studenata. Današnji put filozofije u nekakvo novo legitimiziranje univerziteta moguće je samo ako ova revidira svoj stav prema toj instituciji. Možemo li re-legitimiziranje univerziteta shvatiti kao jedan novi vic?!Die Grundfrage dieser Studie ist wie diese Forschung uns ermöglichen könnte, vor der Idee der Universität einen neuen Horizont zu öffnen. Fichtes, Schleiermachers und Humboldts Behharen auf der Verteidigung der Autonomie der Universität hat ein anderes Problem verursacht – schicksalhafte Beziehung der Universität mit dem Staat, die sich als zu schwierige Belastung erwiesen hat. Unter dem Einfluss des Staates eine professionelle Kompetenz zu produzieren, in der Welt, die an Verwaltungs- und Wirtschaftlichsfunktionalität und Leistungsfähigkeit zunehmend insistierte, entfernte die Universität weiter von ihren modernen aufklärerisch-humanistischen Rahmen, d.h. von der verkündigten emanzipatorischen Rolle des Wissens. Die Universität war, aber, gleichartig das Opfer des hoch gehobenen Tons, mit dem die Philosophen des deutschen Idealismus über sie gesprochen haben. Damit wird die Universität zwischen Wissenschaft, Nation und Staat verspannt. Die Idee der Universität verwandelte sich in die Ideologie der Universität. Die Universität ist ohne ihre Idee geblieben. So heute zustimmt, bei Habermas, Lyotard und Derrida, die Antwort auf die Frage ob die Idee der Universität immer noch die Institution selbst legitimieren könnte, mit dem Versuch des Erwachens der „lebendigen Akteure“ der Universität, Professoren und Studenten. Der heutige Weg der Philosophie in eine neue Legitimierung der Universität ist möglich nur wenn sie ihre Haltung zu der Institution revidiert. Können wir die Re-Legitimierung der Universität als einen neuen Witz verstehen?

How important are earnings announcements as an information source?

In a competitive information market, a single information source can only dominate other sources individually, not collectively. We explore whether earnings announcements constitute such a dominant source using Ball and Shivakumar’s (2008) R2 metric: the proportion of the variation in annual returns explained by the four quarterly earnings announcement returns. We find that the earnings announcement days’ R2 is 11 percent — higher than the corresponding R2 of days with dividend announcements, management forecasts, preannouncements, 10-K and 10-Q filings, and their amendments, and comparable to that of the four days with largest realized absolute return in a year. Additional analysis reveals that earnings announcements convey extreme bad news as often as management forecasts and preannouncements; for any other type of news earnings announcements are much more frequent. We conclude that earnings announcements are an important source of new information in the equity market.

Street Earnings Activation Delay

Street earnings are non-GAAP earnings, adjusted for consistency with the analyst majority basis and disseminated by forecast data providers (FDPs). We find that the time it takes an FDP to incorporate street earnings in its products (activation delay, hereafter) reflects variation in the difficulty of constructing street earnings, investor demand for timely street earnings, and FDPs' limited attention and resources. Furthermore, the market reaction to reported earnings is more timely when activation delay is shorter, and price discovery is highly concentrated during the hour after street earnings are activated. Finally, activation delay increases the delay with which street earnings are incorporated in analyst forecasts. We conclude that frictions in information processing prevent market participants from instantaneously constructing and incorporating street earnings in their decisions, and that FDPs play a key role in alleviating these frictions

Loss Function Assumptions in Rational Expectations Tests on Financial Analysts\u27 Earnings Forecasts

Prior research concludes that financial analysts do not process public information efficiently in generating their earnings forecasts. The OLS regression-based tests used in prior studies assume implicitly that analysts face a quadratic loss function, or that analysts minimize their squared forecast errors. In contrast, we argue that analysts face a linear loss function, or that they minimize their absolute forecast errors. We conduct and compare rational expectations tests conditioned on these two alternative loss functions. While we replicate prior findings of inefficiency with OLS regressions, we find virtually no evidence of forecast inefficiency with Least Absolute Deviation regressions, where we explicitly assume a linear loss function

The Effectiveness of Regulation Fd

We examine whether Regulation FD has reduced the informativeness of analysts\u27 information outputs. For a sample of financial analysts\u27 earnings forecasts and recommendations released between October 23, 1999 and October 23, 2001, we show that in the post-Regulation period the absolute price impact of information disseminated by financial analysts is lower by 32%. We also show that the drop in price impact varies systematically with brokerage house and stock characteristics related to the level of selective disclosure prior to Reg FD. Based on the time-series and cross-sectional evidence we conclude Regulation FD has been effective in curtailing selective disclosure

Loss Function Assumptions in Rational Expectations Tests on Financial Analysts\u27 Earnings Forecasts

Prior research concludes that financial analysts do not process public information efficiently in generating their earnings forecasts. The OLS regression-based tests used in prior studies assume implicitly that analysts face a quadratic loss function, or that analysts minimize their squared forecast errors. In contrast, we argue that analysts face a linear loss function, or that they minimize their absolute forecast errors. We conduct and compare rational expectations tests conditioned on these two alternative loss functions. While we replicate prior findings of inefficiency with OLS regressions, we find virtually no evidence of forecast inefficiency with Least Absolute Deviation regressions, where we explicitly assume a linear loss function