Relationship between Information Quality and Expected Earning Price Ratio: an Empirical Test
The aim of the paper is to investigate the relationship between information quality and expected earning price ratio.
According to our approach, information quality is a very relevant intangible asset related to the managements ability to meet the information requirements of the players involved in a companys income and financial dynamics. Financial analysts are particularly important in this framework. Therefore, we identified an indicator to define the quality of the information disclosed to analysts. At a later moment, we verified the existence of a correlation between that indicator and the expected earning price ratio.
Our research hypothesis seems to have found empirical evidence. We should also consider the importance of the results for the management. In fact, if the managements ability to provide analysts with accurate information favours a lower expected earning price ratio, the management will need to check regularly the level and quality of the information disclosed.