Information search volume as a predictor of information explanatory power
International Journal of Accounting & Information Management
ISSN: 1834-7649
Article publication date: 3 August 2015
Abstract
Purpose
This paper aims to examine whether information search frequency of accounting information is related to the explanatory power of accounting information for firm market value. It also examines whether information content and state of nature can have an impact on this relationship.
Design/methodology/approach
The paper is an empirical study using Web search volume data collected from Google Trends and financial and market data collected from Compustat.
Findings
This paper finds that investors use Web search engines as an alternative way to search for information they need, search frequency of accounting information is positively related to the explanatory power of accounting information for firm market value, the relationship is found differential between statements and categories within a statement depending on the information content and the relationship is found stronger during economic upturns.
Research limitations/implications
This paper examines 59 accounting items that are cross-firm commonly reported and that have data availability in Compustat. The external validity might be an issue.
Practical implications
This paper is of interest to standard setters, corporate management and academics who wish to understand and improve the value of accounting information in the capital market.
Originality/value
This paper is the first study which provides a comprehensive examination of the impact of investors’ information search volumes on the explanatory power of accounting information. It is also the first paper that intrudes Google Trends search volume data into accounting research.
Keywords
Citation
Xu, B. and Huang, Z. (2015), "Information search volume as a predictor of information explanatory power", International Journal of Accounting & Information Management, Vol. 23 No. 3, pp. 238-252. https://doi.org/10.1108/IJAIM-06-2014-0042
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited