We examine how investors’ attention, caused by an earnings surprise, affects information asymmetry and misinterpretation of public information, and the risk of a subsequent stock crash, in Korea. We find the following: 1) both information asymmetry and misinterpretation decrease (increase) after a positive (negative) earnings surprise; 2) the existence of an earnings surprise itself is important for information asymmetry, while misinterpretation changes only after a sufficiently large surprise; 3)past earnings surprises are more important than the latest one, although the latter effect is significant; and 4) the resulting changes in information asymmetry and misinterpretation generally reduce stock crash risk.​

Keywords: positive earnings surprise, attention, information asymmetry, misinterpretation of public information, stock price crash risk

JEL classification: G12, G14