Stock Price Response to Accounting Information in Oligopoly

Abstract

In this article, the authors explore the linkages between the Ball-Brown effect and the information transfer effect in oligopoly. Using the data from the Wall Street Journal's Digest of Earnings Report column, they analyze how the stock market reacts to the subearnings information. The authors show that an unexpected increase in sales is good news to the disclosing firm as well as to its competitors. However, an unexpected increase in costs is bad news to the disclosing firm but good news to its competitors. The Ball-Brown effect can be viewed as a consequence of stock market reactions to subearnings disclosure. Copyright 1992 by University of Chicago Press.

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