Information content of whispers relative to firm size

PurposeThe 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/approachUsing 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.FindingsThe 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/valueGiven 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.