Cross-border information transfers: evidence from profit warnings issued by European firms

Abstract

This paper reports evidence on cross-border accounting information transfers associated with profit warning announcements. Using a sample of firms from 29 European countries, we find that negative earnings surprises disclosed by firms in one country affect investors’ perceptions of comparable non-announcing firms in other countries. The form and magnitude of cross-border effects is consistent with domestic transfers. Tests explaining variation in cross-border information transfers provide some (albeit rather limited) evidence that effects vary according to a range of firm-, industryand country-level characteristics.