Abstract
This study provides a test of dominant firm theory by examining earnings-induced information transfers within industries that have a dominant firm. Based on the economic asymmetries between dominant and fringe firms, it is posited that the earnings announcements of dominant firms will act as an “industry bell,” resulting in a positive association between the unexpected earnings of the dominant firm and the security price changes of the fringe firms. Due to their position as industry followers, the earnings announcements of the fringe firms are not expected to affect the security prices of the dominant firm. The results of empirical tests are generally consistent with dominant firm theory.
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