Worldwide earnings news and equity price movement: a supply-chain perspective

Xing Chen, Chenchen Li and Chongfeng Wu

Applied Economics, 2023, vol. 55, issue 40, 4695-4711

Abstract: This paper shows that worldwide earnings news can significantly influence the asset pricing in China, indicating the information transmission along the global supply chain. We investigate how stock prices of Chinese-listed firms react to the earnings announcements of their worldwide supply-chain partners and find that stock returns will exhibit a significant drift upwards (downwards) after the good (bad) news of their customers and suppliers. Moreover, we provide evidence that the equity price movement may be driven by the earnings information transmission between supply-chain partners and this effect is strengthened for the firms with higher information asymmetry or investor attention. Third, our primary results hold with a battery of robustness checks, including multiple controls consideration, proxy usage of earnings news, division of the sample, and length of market responses.

Date: 2023
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DOI: 10.1080/00036846.2022.2130871

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