Financial information environment of loss firms.

摘要

In this paper I study whether firms which report accounting losses experience higher levels of information asymmetry among investors than those which report profits. In my empirical analyses, I use the bid-ask spread and analyst forecast dispersion to proxy for the unobservable information asymmetry among investors. Consistent with predictions, I find that, on average, loss firms experience higher relative and absolute spreads, and higher analyst forecast dispersion than profit firms. I also study whether the reporting of special items in firms' income statements affects the information asymmetry among investors in a loss/profit context. Results show that losses continue to be associated with higher levels of information asymmetry even after I control for the effect of special items. Furthermore, special items themselves are associated with higher levels of information asymmetry under some circumstances. Supplementary tests indicate that capital market intermediation, measured by analyst following, mitigates the higher level of information asymmetry associated with the incidence of losses and special items.