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In a setting with local bias in investors’ portfolios, the purpose of this paper is to study the stockholder wealth impact of negative earnings surprises for local firms as reported in a local newspaper.

In the sample of earnings announcements, the authors observe that the stock price impact is statistically significantly more (less) negative in the case where the absolute difference between announced earnings and the consensus analysts’ forecast is greater (smaller) than the absolute difference between the announced earnings and last-year-same-quarter earnings.

The differential effect is only observed when the stock market uncertainty (VIX) is high. In the empirical analysis, the paper finds that investors’ reactions to negative earnings surprises appear to be influenced by the level of historical, publicly available last-year-same-quarter earnings.

When stock market uncertainty is high, the result suggests that the stock market may not be semi-strong efficient and/or that there is a behavioral response to negative earnings surprises in a setting where investors have portfolios over-weighted with local firm stocks.

This study aims to examine a large, non-disclosed production contract awarded to Lockheed Corp. in the context of a trade-off between a contractually required non-disclosure clause and the need (as a publicly traded firm) to disclose material information to its shareholders. This production contract generated significant cash flows to the firm as evidenced by growth in its earnings. However, the existence of the production contract and its contribution to Lockheed’s earnings, was not disclosed by the firm to shareholders and potential investors while the production contract was being executed.

The authors examine the market reaction to several key contract events which were not disclosed at the time they occurred, in compliance with the contractually required non-disclosure clause.

A statistically significant stock price reaction around the time of the award of this non-public contract, indicative of trading by some capital market participants using non-public information was documented.

Because similar large non-public contracts funded by the government are common in the industrial economy, we conclude by discussing implications for organizational structure, firm’s cost of capital, equity-based compensation and market efficiency.

Recent research on local bias provides evidence that investors' portfolios include a non‐negligible allocation to stocks in firms that are geographically proximate to the investors. The reasons postulated for local bias include familiarity with firms, “word‐of‐mouth” communication effects, and ability to exploit local news. The purpose of this paper is to investigate the value‐relevance of local news, specifically earnings announcement surprises, in the context of the well‐documented local bias in investors' portfolios.

Using a hand‐collected panel dataset spanning 15 years of quarterly earnings announcements of publicly traded firms, abnormal stock returns engendered by earnings surprises based on local newspaper announcements are compared to those from earnings surprises based on financial analysts' forecasts (I/B/E/S).

In contrast to the case, when both sources of earnings surprises are negative, the authors find a statistically significant differential stock price effect in a sample where local firms' earnings announcements in the local newspaper signal positive earnings surprises, but the earnings surprise based on financial analysts' forecasts is negative. This result remains after controlling for time‐ and firm‐fixed effects. In additional tests, the authors establish that the result is predicated on a local firm's earnings announcement being reported in the local newspaper.

The paper's findings suggest that the results of empirical research on the information content of earnings surprises based solely on analysts' forecasts should be interpreted with caution. It was found that the stock price impact of earnings surprises is also significantly influenced by local newspaper reports of the announced quarterly earnings of local firms.