Emphasis on Pro Forma versus GAAP Earnings in Quarterly Press Releases: Determinants, SEC Intervention, and Market Reactions

2005 ◽  
Vol 80 (4) ◽  
pp. 1011-1038 ◽  
Author(s):  
Robert M. Bowen ◽  
Angela K. Davis ◽  
Dawn A. Matsumoto
Keyword(s):  
Stock Market ◽  
Media Coverage ◽  
Press Release ◽  
Significant Shift ◽  
Press Releases ◽  
Market Reactions ◽  
Pro Forma Earnings ◽  
Stock Market Reactions ◽  
Earnings Press Releases ◽  
Pro Forma

Earnings press releases provide managers a forum to present their firm's quarterly financial information and perhaps influence perceptions of the firm's stakeholders. We explore the use of managerial emphasis as a disclosure tool and contribute to the debate over pro forma earnings. We examine (1) the determinants of emphasis placed on pro forma and GAAP earnings within quarterly earnings press releases, (2) whether there has been a shift away from emphasizing pro forma earnings toward GAAP earnings, and (3) whether stock market reactions to earnings news were influenced by emphasis placed on metrics within the press release. We find that firms emphasize metrics that are more value-relevant and portray more favorable firm performance. We also find that the extent of a firm's media coverage affects managers' emphasis decisions. Further, our results indicate a highly significant shift toward GAAP emphasis and away from pro forma emphasis in 2002 relative to 2001. Finally, our stock market tests suggest that greater emphasis on an earnings metric results in a stronger market reaction to the surprise in that metric. Overall, these findings are consistent with managers using emphasis in the earnings press release as a disclosure tool and this emphasis influencing at least one important stakeholder group—investors.

scholarly journals Market reactions to CSR news in different industries

2020 ◽  
Vol 25 (2) ◽  
pp. 243-261
Author(s):  
Andrea Pérez ◽  
María del Mar García de los Salmones ◽  
Carlos López-Gutiérrez
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Media Coverage ◽  
Market Value ◽  
Market Reactions ◽  
Content Type ◽  
Goods And Services ◽  
The Media ◽  
Stock Market Reactions ◽  
Corporate Social

PurposeBased on the premises of the institutional theory, in this paper, we explore the effects that the media coverage of positive and negative Corporate Social Responsibility (CSR) news have on the stock market value of companies in diverse industries.Design/methodology/approachUsing a sample of 195 online articles published in the most important Spanish business newspaper, we implement an event study and a regression analysis.FindingsThe findings show that positive and negative CSR news, usually, have significant impacts on the stock market value of companies. Specifically, the market reaction is stronger under the announcement of negative news in all industries (i.e. basic, energy, finance and goods and services), although positive news also cause significant positive stock market reactions in the finance and basic industries.Originality/valueAlthough the media plays an indispensable role in the dialogue around CSR, much of the research focused on the role of the media on the CSR-CFP link does not consider how the industry variable can affect the abnormal stock returns derived from CSR news. This research contributes to this gap in the literature by exploring the differences that exist in the stock market reactions to CSR news based on the industry in which the companies operate.

scholarly journals The Effect of Pension Fund Activism on the Stock Market and the Role of Media: Evidence from Korea

2020 ◽  
Vol 49 (4) ◽  
pp. 489-513
Author(s):  
Kyung Ryang Ko ◽  
Woojin Kim
Keyword(s):  
Stock Market ◽  
Media Coverage ◽  
Pension Fund ◽  
Market Response ◽  
Market Reactions ◽  
Proxy Voting ◽  
Stock Market Reaction ◽  
Voting Decisions ◽  
Stock Market Reactions

This study examines how the stock market reacts to pension fund activism. Recent changes in the Korea National Pension Service’s (NPS) voting policy present an ideal context to examine the effect of shareholder activism on stock market reactions. Using a sample of 46 firms for which the NPS pre-disclosed to veto agendas of 2019 annual shareholder meetings, this study demonstrates that the stock market reacts negatively to the NPS “vote no” announcements. The results reveal that shareholders pay attention to the negative signal the NPS’s veto announcement delivers. We also find that publicity is positively related to stock market reactions, consistent with the hypothesis that media coverage is an efficient mechanism for pension fund activism. The study further examines whether the negative stock market response is driven not by the NPS’s pre-disclosure to “vote no,” but just by the pre-disclosure. An event study is conducted using a sample of firms for which the NPS disclosed proxy voting decisions ahead of 2019 annual meetings but did not announce to veto. The results do not reveal a significant market response, suggesting that the pre-announcement itself does not affect the stock market reaction.

scholarly journals Social sentiment segregation: Evidence from Twitter and Google Trends in Chile during the COVID-19 dynamic quarantine strategy

PLoS ONE ◽  
2021 ◽  
Vol 16 (7) ◽  
pp. e0254638
Author(s):  
Fernando Díaz ◽  
Pablo A. Henríquez
Keyword(s):  
Stock Market ◽  
Media Coverage ◽  
Google Trends ◽  
Cross Sectional ◽  
Market Reactions ◽  
The Public ◽  
Health Authorities ◽  
Stock Market Reactions ◽  
High Degree ◽  
The Impact

The Chilean health authorities have implemented a sanitary strategy known as dynamic quarantine or strategic quarantine to cope with the COVID-19 pandemic. Under this system, lockdowns were established, lifted, or prolonged according to the weekly health authorities’ assessment of municipalities’ epidemiological situation. The public announcements about the confinement situation of municipalities country-wide are made typically on Tuesdays or Wednesdays before noon, have received extensive media coverage, and generated sharp stock market fluctuations. Municipalities are the smallest administrative division in Chile, with each city broken down typically into several municipalities. We analyze social media behavior in response to the confinement situation of the population at the municipal level. The dynamic quarantine scheme offers a unique opportunity for our analysis, given that municipalities display a high degree of heterogeneity, both in size and in the socioeconomic status of their population. We exploit the variability over time in municipalities’ confinement situations, resulting from the dynamic quarantine strategy, and the cross-sectional variability in their socioeconomic characteristics to evaluate the impact of these characteristics on social sentiment. Using event study and panel data methods, we find that proxies for social sentiment based on Twitter queries are negatively related (more pessimistic) to increases in the number of confined people, but with a statistically significant effect concentrated on people from the wealthiest cohorts of the population. For indicators of social sentiment based on Google Trends, we found that search intensity during the periods surrounding government announcements is positively related to increases in the total number of confined people. Still, this effect does not seem to be dependent on the segments of the population affected by the quarantine. Furthermore, we show that the observed heterogeneity in sentiment mirrors heterogeneity in stock market reactions to government announcements. We provide evidence that the observed stock market behavior around quarantine announcements can be explained by the number of people from the wealthiest segments of the population entering or exiting lockdown.

COVID-19: Stock Market Reactions to the Shock and the Stimulus

2020 ◽  
Author(s):  
Maretno Agus Harjoto ◽  
Fabrizio Rossi ◽  
John Paglia
Keyword(s):  
Stock Market ◽  
Market Reactions ◽  
Stock Market Reactions

Earnings Informativeness and Strategic Disclosure: An Empirical Examination of “Pro Forma” Earnings

2004 ◽  
Vol 79 (3) ◽  
pp. 769-795 ◽  
Author(s):  
Barbara A. Lougee ◽  
Carol A. Marquardt
Keyword(s):  
Market Efficiency ◽  
Predictive Ability ◽  
Press Releases ◽  
Empirical Examination ◽  
Strategic Disclosure ◽  
Earnings Information ◽  
Pro Forma Earnings ◽  
Earnings Informativeness ◽  
Earnings Surprises ◽  
Pro Forma

This paper provides evidence on the characteristics of firms that include “pro forma” earnings information in their press releases, whether the usefulness of pro forma earnings to investors varies systematically with these characteristics, and whether the investor response to pro forma earnings is consistent with market efficiency or mispricing. Using a sample of 249 press releases from 1997–99, we find that firms with low GAAP earnings informativeness are more likely to disclose pro forma earnings than other firms. We also find that strategic considerations, measured using the direction of GAAP earnings surprises, are an important determinant of pro forma reporting. In addition, our examination of the relative and incremental information content of pro forma earnings shows that investors find pro forma earnings to be more useful when GAAP earnings informativeness is low or when strategic considerations are absent. Tests of the predictive ability of pro forma earnings for future profitability and returns are mixed, and we therefore cannot conclusively determine whether the investor reaction to pro forma earnings at the time of the press release is consistent with market efficiency or mispricing. The paper contributes to the growing literature on pro forma earnings and more generally to the literature on voluntary and strategic disclosure.

scholarly journals Geographic Scope and Real Estate Firm Performance during the COVID-19 Pandemic

2021 ◽  
Vol 14 (7) ◽  
pp. 309
Author(s):  
Xiaoling Chu ◽  
Chiuling Lu ◽  
Desmond Tsang
Keyword(s):  
Firm Performance ◽  
Real Estate ◽  
Stock Market ◽  
Adverse Impact ◽  
Corporate Diversification ◽  
Market Reactions ◽  
Geographic Scope ◽  
The Real Estate ◽  
Real Estate Sector ◽  
Stock Market Reactions

This study examines the effect of geographic scope in mitigating the adverse impact of the COVID-19 pandemic in the real estate sector. Utilizing the Chinese setting over the two-month period in 2020 from the beginning of the outbreak to the successful containment of the spread of virus, we show that while the pandemic has negatively impacted real estate firm returns, firms with broader geographic scope and more geographically diversified property allocations have managed to better endure the crisis. We further find that firms with higher leverage report lower returns during the pandemic irrespective of their geographic scope, but larger firms can lessen the adverse impact of the pandemic only if they have adopted a more diversified strategy. Overall, our study provides novel evidence on the benefit of diversification by demonstrating the importance of geographic scope and diversification at times of crises. Specifically, we show corporate diversification could be especially useful to mitigate the negative stock market reactions resulting from the pandemic. Moreover, diversification could even become essential for larger firms that are expected by the market to be more diversified.

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