Christina Zhu, Accounting, The Wharton School, Suzie Noh, Stanford University, and Eric So, MIT
Abstract: We show that financial reporting spurs consumer behavior. Using granular GPS data, we show that foot-traffic to firms’ commerce locations significantly increases in the days following their earnings announcements. Foot-traffic increases more for announcements with extreme earnings surprises, that correspond to firms’ fiscal year-ends, that occur outside of Fridays, and that elicit greater internet search volume, consistent with earnings announcements spurring consumer behavior by garnering attention. Consumer activity also rises with reductions in solvency risk among firms selling durable goods, consistent with consumers responding to information about firms’ longevity conveyed by their earnings. Using demographic information, we show financial reporting disproportionately affects foot-traffic in populations more likely to consume financial news. Collectively, these results suggest earnings announcements serve a marketing function by drawing attention to firms, and that a byproduct of the financial reporting process is that it shapes consumer behavior.