Earnings News and Local Household Spending

Brandon Gipper, Laura Lingyu Gu, Jinhwan Kim and Suzie Noh
Additional contact information
Brandon Gipper: Stanford U
Laura Lingyu Gu: U of Chicago
Jinhwan Kim: Stanford U
Suzie Noh: Stanford U

Research Papers from Stanford University, Graduate School of Business

Abstract: Using debit and credit card data, we find a one standard-deviation increase in firms’ earnings surprise is linked to a 3% or $5.6 billion increase in aggregate quarterly consumption of local households near the disclosing firms’ headquarters. The effect is more pronounced when earnings news is informative about local households’ wealth, is widely disseminated through media, and is more intensely searched by locals. The change in consumption is concentrated in less expensive goods, such as dining out, and among various local stakeholders, including employees and business owners. Consistent with households not being able to unravel fraud, their consumption reacts even to fraudulent earnings, which reverses only after the fraud is revealed. To corroborate our mechanism, we conduct a nationwide survey of 500 randomly selected households. Nearly 50% of the respondents say their spending decisions are influenced by the financial news of local firms via its effect on local job or investment opportunities. Our findings yield important policy implications of financial reporting on household welfare.

JEL-codes: D12 D15 D80 D81 E21 M41 (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-acc and nep-fdg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.gsb.stanford.edu/faculty-research/work ... l-household-spending

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:4163

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().