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  • About
  • The Global ETD Search service is a free service for researchers to find electronic theses and dissertations. This service is provided by the Networked Digital Library of Theses and Dissertations.
    Our metadata is collected from universities around the world. If you manage a university/consortium/country archive and want to be added, details can be found on the NDLTD website.
1

A Closer Look at Firm--Group "Closeness"

Ross, Jonathan 01 January 2012 (has links)
Firm closeness or comparability is an important concept to investors. Knowing that two firms have been historically close and observing an information announcement by one of the firms gives the investor cues as to the future performance of the other firm. Furthermore, from a methodological point of view, researchers commonly control for firm--group closeness by using industrial classification schemes such as the SIC. To the extent that these schemes group dissimilar firms, the advantage of using these schemes is undermined. This paper more formally examines the comparability concept and develops two new measures of firm--group accounting closeness. Both measures are based on the co--movement of accounting fundamentals. I provide insight regarding the extent to which the SIC and GIC schemes group similar firms. Furthermore, a trading strategy utilizing information in the measures is developed and tested. Results indicate that, when industry closeness is high enough, abnormal returns in the range of 1-3% over a 1-3 day window can be earned around leader information announcement dates. Finally, I contribute to the contagion/information transfer literature, most notably Gleason et al. (2008), by showing that the contagion effects of accounting information announcements are increasing in the closeness of the industry.

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