The Ex Ante and Ex Post Price Effects of Quarterly Earnings Announcements Reflected in Option and Stock Prices

We develop a general equilibrium model in which stock prices of innovative firms exhibit “bubbles” during technological revolutions. In the model, the average productivity of a new technology is uncertain and subject to learning. During technological revolutions, the nature of this uncertainty changes from idiosyncratic to systematic. The resulting bubbles in stock prices are observable ex post but unpredictable ex ante, and they are most pronounced for technologies characterized by high uncertainty and fast adoption. We find empirical support for the model's predictions in 1830–1861 and 1992–2005 when the railroad and Internet technologies spread in the United States. (JEL G12, L86, L92, N21, N22, N71, N72)

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Strategic Benchmarks in Earnings Announcements: The Selective Disclosure of Prior-Period Earnings Components

The Accounting Review ◽

10.2308/accr.2000.75.2.151 ◽

2000 ◽

Vol 75 (2) ◽

pp. 151-177 ◽

Cited By ~ 171

Author(s):

Catherine M. Schrand ◽

Beverly R. Walther

Keyword(s):

Earnings Announcements ◽

Cross Sectional ◽

Quarterly Earnings ◽

Strategic Disclosure ◽

Earnings Surprise ◽

Current Period ◽

Ex Post ◽

Favorable Change ◽

Gain Loss ◽

Selective Disclosure

This paper provides evidence that managers strategically select the prior-period earnings amount that is used as a benchmark to evaluate current-period earnings in quarterly earnings announcements. Managers are more likely to separately announce a prior-period gain from the sale of property, plant, and equipment (PPE) than a loss. This strategy provides the lowest possible benchmark for evaluating current earnings, thereby allowing the manager to highlight the most favorable change in earnings. This strategic disclosure behavior is more likely to occur when it prevents a negative earnings surprise. The observed strategic disclosure decisions are consistent with a conjecture by managers that the nonrecurring nature of the prior-period gain/loss will be forgotten unless it is separately announced. Consistent with this conjecture, there is some evidence that equity investors, one potential target of strategic reporting, use the benchmark that managers provide in earnings announcements to evaluate current earnings, even when the components of this benchmark have different persistence. However, cross-sectional analyses provide no evidence that managers ex post exploit the equity mispricing that occurs between the earnings announcement date and the release of the financial statements.

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The impact of quarterly earnings announcements on stock prices

Financial Sciences ◽

10.15611/fins.2020.2.02 ◽

2020 ◽

Vol 25 (2-3) ◽

pp. 24-40

Author(s):

Patryk Jagliński

Keyword(s):

Stock Prices ◽

Earnings Announcements ◽

Quarterly Earnings ◽

The Impact

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The Effect of Reporting Streaks on Ex Ante Uncertainty

Management Science ◽

10.1287/mnsc.2019.3320 ◽

2020 ◽

Vol 66 (8) ◽

pp. 3771-3787 ◽

Cited By ~ 1

Author(s):

Thaddeus Neururer ◽

George Papadakis ◽

Edward J. Riedl

Keyword(s):

Stock Returns ◽

Earnings Announcements ◽

Earnings Announcement ◽

Risk Premiums ◽

Quarterly Earnings ◽

Earnings Per Share ◽

Ex Ante ◽

Variance Risk ◽

Analyst Earnings ◽

Lower Uncertainty

This paper predicts and finds that investor uncertainty surrounding a key information release event—the earnings announcement—is decreasing in a firm’s reporting streak. We use two proxies related to investor ex ante uncertainty and corresponding pricing of such uncertainty: option-implied volatilities and variance risk premiums; both are measured with maturities surrounding the impending quarterly earnings announcement. Consistent with prior research, we measure reporting streak as the number of consecutive quarters the firm meets or beats the consensus analyst earnings-per-share forecast. Empirical results confirm expectations that the two uncertainty-related constructs are decreasing in the length of the reporting streak. These results, combined with further evidence documenting that lower uncertainty leads to lower stock returns surrounding the earnings announcements, suggest that longer reporting streaks reflect lower risk during earnings announcements. This paper was accepted by Shiva Rajgopal, accounting.

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