Keywords
information dissemination, internet, web coverage, price formation, earnings announcements
Abstract
The internet is an enormous and growing source of information for investors about the opinions of others. Virtually any individual with internet access can express opinions about firms and editorialize about company news. However, to date we know very little about the impact these nontraditional internet intermediaries have on markets. We develop a framework wherein internet information intermediaries fall along a spectrum of professionalism and document a nuanced relationship between coverage by these intermediaries and capital market effects. Using a novel dataset that tracks coverage of companies by individuals posting on thousands of websites, we find that coverage by professional and semi-professional intermediaries is associated with positive capital market effects, but coverage by non-professional internet intermediaries has the opposite effect – hindering price formation. The detrimental effects of non-professional coverage are observed most strongly when the intermediaries have a larger audience. Collectively, these results provide important new insights into the internet’s role as an information intermediary.
Original Publication Citation
Drake, Michael S. and Thornock, Jacob and Twedt, Brady J., The Internet as an Information Intermediary (December 12, 2016). Review of Accounting Studies, 22 (2), 2017.http://dx.doi.org/10.2139/ssrn.2625672
BYU ScholarsArchive Citation
Drake, Michael S.; Thornock, Jacob R.; and Twedt, Brady J., "The Internet as an Information Intermediary" (2017). Faculty Publications. 8390.
https://scholarsarchive.byu.edu/facpub/8390
Document Type
Peer-Reviewed Article
Publication Date
2017
Publisher
Review of Accounting Studies
Language
English
College
Marriott School of Business
Department
Accountancy
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