Does Business Strategy Impact a Firms Information Environment? Academic Article uri icon

abstract

  • This study examines whether a firms business strategy affects their information environment. Organizational theory suggests that firms following an innovative prospector strategy have greater incentives to provide more frequent voluntary disclosures than firms following an efficient defender strategy. Furthermore, prospectors are more likely to attract greater coverage by external information intermediaries. We find that prospectors engage in more frequent management earnings guidance, issue more press releases, and are followed by more financial analysts compared with defenders. Next, we examine the association between business strategy and information asymmetry. We find that despite prospectors having attributes associated with information asymmetry (e.g., R&D, growth options), prospectors have lower information asymmetry than defenders. We attribute this finding to prospectors greater access to both internal and external sources of disclosure compared with defender firms, which we confirm using mediation analysis. Collectively, our results suggest that business strategy does affect firms information environments, incremental to known determinants, and that strategy serves as a useful context for understanding a firms underlying information environment.

published proceedings

  • Journal of Accounting Auditing & Finance

author list (cited authors)

  • Bentley-Goode, K. A., Omer, T. C., & Twedt, B. J.

citation count

  • 64

complete list of authors

  • Bentley-Goode, Kathleen A||Omer, Thomas C||Twedt, Brady J

publication date

  • October 2019