The Role of Major Data Providers in Processing and Disseminating Information in Financial Markets

This study investigate whether major data providers serve as information intermediaries in financial markets. We focus on earnings information processed and disseminated by First Call and IBES. First Call and IBES are the two most important data providers of earnings information in financial markets. Our analysis exploits the fact that First Call (IBES) disseminates about 20% (29%) of announced earnings with a delay of at least one trading day. We document that the abnormal trading volume is about 10% lower for earnings announcements disseminated with a delay by major data providers compared to immediately distributed earnings news. We establish causality by showing that there is a significant abnormal trading volume effect on the day of the delayed dissemination by First Call/IBES. Moreover, we show that a change in First Call’s dissemination practice in September 2009 significantly improves the earnings information diffusion in financial markets.

This seminar is organised by the Erasmus Accounting Research Group.