"This study examines whether online consumer product reviews contain information that is associated with firms' earnings and stock returns around earnings announcements. Ex ante, it is unclear whether consumer reviews are useful to investors because consumer reviews have not been easily accessible or widely disseminated. Based on 18,794,143 consumer reviews posted on Amazon.com during 1996-2014, I construct quarterly measures of abnormal tone and abnormal rating of consumer reviews and link them to earnings surprises and earnings announcement returns. Focusing on concurrent earnings surprises, I find that negative abnormal tone is significantly associated with more negative earnings surprises while positive abnormal tone is not associated with positive earnings surprises. My analyses of abnormal returns around concurrent earnings announcements show that negative abnormal tone is positively associated with earnings announcement returns, but positive abnormal tone is not. Finally, I find that disagreements in review ratings (measured as the standard deviation of consumer review ratings) are positively associated with unexplained trading volume around earnings announcements, while disagreements in review tone (measured as the standard deviation of consumer review tone) are not. Taken together, these findings suggest that abnormal review tone is more useful than abnormal review rating in explaining concurrent earnings surprises and earnings announcement returns, but the disagreements reflected through the distribution of consumer ratings is more informative about the unexplained trading volume around earnings announcements. My results suggest that both the rating and the tone of consumer reviews are informative, but along different dimensions."--Page ii.
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