Vertical Information Transfers of the Information Electronics Industry in Taiwan
Date Issued
2008
Date
2008
Author(s)
Wang, Yao-Hui
Abstract
Information transfer means that information disclosed by one firm can have effect on the stock prices of other related firms. Prior studies found intra-industry horizontal information transfer and vertical information transfer between retailer and suppliers. In an industry, up-stream firms supply goods to down-stream firms, thus creating a supply network. The announcements of operation results by down-stream firms may provide information that investors can use to revise their assessments of the up-stream firms’ future operating results and cash flows. Therefore, the stock prices of the up-stream firms may change as a result of the announcements. The characteristics of complicated technology in the information electronics industry causes division of labor, hence the information electronics industry has a lengthy supply network. This paper investigates the extent of intra-industry vertical information transfers associated with the monthly sales announcements of a sample of Taiwan’s information electronics companies. We assess vertical information transfers and their degree by examining the association between the monthly sales announcements of down-stream announcing firms and up-stream firms. Also we investigate the distance dilution effect of vertical information transfers. Last, we assess the effect of connection degree between down-stream announcing firm and up-stream firms. We find vertical information transfers do exist in the information electronics industry, and the amount of information about depends on the supply and demand relationship between firms. We also find that the longer distance between the announcing firm and up-stream firms, the weaker the vertical information transfer effect. However, we do not find the effect of connection degree on vertical information transfers.
Subjects
vertical information transfers
social network analysis
information electronics industry
supply network
monthly sales announcement
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