Information content of whispers relative to firm size

Purpose -The purpose of this paper is to investigate the size effect of market reaction to unexpected earnings based on whispers or unofficial individual earnings forecasts. Design/methodology/approach -Using both univariate and multiple regression analysis, this paper attempts to demonstrate that there is a size effect in the market reaction to unexpected earnings based on whispers. The empirical results are based on 13,795 quarterly earnings whispers over 1997-2006. Findings -The results show that for both abnormal returns (ARs) and trading volume, the market reaction for big firms is less compared to that of small firms. Originality/value -Given that information for small firms is less available and transparent than for big firms, this paper provides useful evidence that whispers play a larger role in equity pricing for small firms.