Information content of earnings in an unregulated market: the co-operative cotton mills of Lancashire, 1880–1900

Abstract

This paper analyses the relationship between earnings and dividend announcements and contemporaneous stock returns. Many previous studies have examined this association, although few address its social and historical context. In late 19th century Lancashire, there was an unusual coincidence of co-operative ownership and the trading of ownership rights on a liquid stock market. Using stock market numbers extracted from the local financial press in conjunction with other relevant archives, this paper examines the usefulness of accounting information provided in circumstances without regulatory duress and where its disclosure was subject to the scrutiny of a well-informed, and socially diverse, shareholding class. Results suggest that employee involvement via ownership rights is likely to improve the information content of accounting reports.