The Vertical Information Transfer of Conference Calls along the Supply Chain: An Example from the Semiconductor Industry in Taiwan

Focusing on the semiconductor industry in Taiwan, we hypothesize that the market gives a premium for firms whose upstream firms disclose favorable news through conference calls, regardless of whether it is financial or nonfinancial information. We find that firms’ accumulative abnormal returns (thereafter CAR) are positively associated with both unexpected earnings forecasts and nonfinancial information contained in conference calls held by upstream firms. We further find that the CAR is positively related to the echelon distance of the firms. Finally, we also find that firms need more time to digest the information contained in conference calls held by their upstream firms as the echelondistance between the two firms along the supply chain becomes greater.