Are Investors Influenced by the Order of Information in Earnings Press Releases?

2020 ◽  
Author(s):  
Lin Cheng ◽  
Darren T. Roulstone ◽  
Andrew Van Buskirk
Keyword(s):  
Experimental Evidence ◽  
Earnings Announcements ◽  
Negative Information ◽  
Positive Relation ◽  
Press Releases ◽  
Cognitive Effect ◽  
Earnings Announcement ◽  
Quarterly Earnings ◽  
Earnings Information ◽  
Earnings Press Releases

We examine how the ordering of information within quarterly earnings announcements influences investor response to those announcements. Specifically, we examine whether earlier discussion of earnings information, and earlier discussion of qualitatively positive or negative information, is associated with stronger responses to that information. Controlling for the linguistic content of the earnings announcement, we find a positive relation between investor response to information and the prioritization of that information in the earnings announcement. We find no evidence of investor overreaction and, to the contrary, find some evidence that investors underreact to prioritized information. Our evidence, in conjunction with experimental evidence in Elliott (2006), suggests that information placement influences investors' responses. However, unlike the experimental evidence in Elliott (2006), our archival results suggest that investor response to information placement is warranted, rather than the result of an unintentional cognitive effect.

Expanded Disclosures and the Increased Usefulness of Earnings Announcements

2002 ◽  
Vol 77 (3) ◽  
pp. 515-546 ◽  
Author(s):  
Jennifer Francis ◽  
Katherine Schipper ◽  
Linda Vincent
Keyword(s):  
Earnings Announcements ◽  
Absolute Amount ◽  
Press Releases ◽  
Bottom Line ◽  
Market Reactions ◽  
Earnings Announcement ◽  
Earnings Information ◽  
Unexpected Earnings ◽  
The Absolute ◽  
Over Time

We investigate three explanations for prior studies' finding that the usefulness of earnings announcements, as measured by their absolute market responses, has increased over time. We confirm this increase for a sample of 426 relatively large, stable firms over 1980–1999. We find no evidence that this over-time increase in the magnitude of the market reaction to our sample firms' earnings announcements is attributable to increases in the absolute amount of unexpected earnings conveyed in the announcements or to increases in the intensity of investors' average reaction to unexpected earnings. To test the third explanation—an over-time expansion in the amount of concurrent (with bottom line earnings) information in earnings announcement press releases—we analyze and code the contents of 2,190 earnings announcement press releases made by 30 of our sample firms over 1980–1999. Concurrent disclosures increased significantly over this period and we find that these concurrent disclosures, especially the inclusion of detailed income statements, explain increases in the absolute market reactions to earnings announcements for our sample firms.

Institutional Holdings and Trading Volume Reactions to Quarterly Earnings Announcements

1997 ◽  
Vol 12 (1) ◽  
pp. 1-14 ◽  
Author(s):  
Jeong-Bon Kim ◽  
Itzhak Krinsky ◽  
Jason Lee
Keyword(s):  
Trading Volume ◽  
Earnings Announcements ◽  
Institutional Ownership ◽  
Positive Relation ◽  
Earnings Announcement ◽  
Quarterly Earnings ◽  
Price Reaction ◽  
Institutional Holdings ◽  
Abnormal Trading Volume

This paper empirically examines the incremental relation between trading volume surrounding quarterly earnings announcements and institutional holdings. Consistent with Cready (1988) and Lee (1992), we find a significant positive relation between abnormal trading volume and the fraction of institutional ownership during the period immediately following an earnings announcement, after controlling for the magnitude of the associated price reaction and the dispersion of analysts' EPS forecasts. The results are robust to various measures of abnormal trading volume. Our findings suggest that newly released information does not necessarily have the same value to heterogeneous investor types and support Lev's (1988) emphasis on the importance of focusing on investor classes.

scholarly journals Measuring The Usefulness Of Information For Investors Inferences: The Case Of Quarterly Earnings Announcements

2010 ◽  
Vol 8 (7) ◽  
Author(s):  
C. Catherine Chiang ◽  
Yaw M. Mensah
Keyword(s):  
Financial Performance ◽  
Stock Price ◽  
Value Of Information ◽  
Earnings Announcements ◽  
New Method ◽  
Rates Of Return ◽  
Earnings Announcement ◽  
Quarterly Earnings ◽  
Other Information

In this paper, we propose a new method for assessing the usefulness of information, its inferential value. In the context of accounting and finance, we define the inferential value of information about a firm as how efficaciously the information enables investors to draw correct inferences regarding its future financial performance. On the basis of this definition, we develop a stylized model to measure the proximity of a firm’s future realized rates of return to the estimated rates of return implied by its current stock price. We then use the new measure to test the hypothesis that quarterly earnings announcements have a higher inferential value than other information arriving during interim (non-earnings announcement) periods. Our empirical findings suggest that investors are able to make more informative inferences about a firm’s future profitability based on quarterly earnings announcement than based on information available during interim periods. However, our findings also suggest that, in general, investors do not correctly anticipate future losses. Finally, we find that earnings announcements are as important in anticipating future profitability for larger firms as they are for smaller firms.

scholarly journals Quarterly Earnings Announcement Effect on Stock Return and Trading Volume in Nepal

2019 ◽  
Vol 4 ◽  
pp. 32-47
Author(s):  
Jeetendra Dangol ◽  
Ajay Bhandari
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Trading Volume ◽  
Earnings Announcements ◽  
Good News ◽  
Fiscal Year ◽  
Event Analysis ◽  
Earnings Announcement ◽  
Quarterly Earnings ◽  
Analysis Methodology

The study examines the stock returns and trading volume reaction to quarterly earnings announcements using the event analysis methodology. Ten commercial banks with 313 earnings announcements are considered between the fiscal year 2010/11 and 2017/18. The observations are portioned into 225 earning-increased (good-news) sub-samples and 88 earning-decreased (bad-news) sub-samples. This paper finds that the Nepalese stock market is inefficient at a semi-strong level, but there is a strong linkage between quarterly earnings announcement and trading volume. Similarly, the study provides evidence of existence of information content hypothesis in the Nepalese stock market.

Asymmetric Timeliness and the Resolution of Investor Disagreement and Uncertainty at Earnings Announcements

2019 ◽  
Vol 95 (4) ◽  
pp. 23-50 ◽  
Author(s):  
Mary E. Barth ◽  
Wayne R. Landsman ◽  
Vivek Raval ◽  
Sean Wang
Keyword(s):  
Stock Returns ◽  
Earnings Announcements ◽  
Investment Decisions ◽  
Bad News ◽  
Positive Relation ◽  
Potential Cost ◽  
Earnings Announcement ◽  
Asymmetric Timeliness ◽  
Valuation Uncertainty ◽  
Investor Disagreement

ABSTRACT This study finds that greater asymmetric timeliness of earnings in reflecting good and bad news is associated with slower resolution of investor disagreement and uncertainty at earnings announcements. These findings indicate that a potential cost of asymmetric timeliness is added complexity from requiring investors to disaggregate earnings into good and bad news components to assess the implications of the earnings announcement for their investment decisions. Such a disaggregation impedes the speed with which investor disagreement and uncertainty resolve. The findings indicate that asymmetric timeliness also delays price discovery at earnings announcements. We also find a positive relation between asymmetric timeliness and stock returns during the earnings announcement period after the initial price reaction to the announcement, which is consistent with resolution of valuation uncertainty. However, we do not find clear evidence of more net stock purchases during this period by insiders of firms with greater asymmetric timeliness. JEL Classifications: M41; G14.

Bank Stock Returns And Quarterly Earnings: Price Responses To Imminent Earnings Announcements

2011 ◽  
Vol 11 (2) ◽  
pp. 135 ◽  
Author(s):  
Thomas F. Gosnell ◽  
Andrea J. Heuson ◽  
Robert E. Lamy
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Earnings Announcements ◽  
Abnormal Returns ◽  
Quarterly Earnings ◽  
Price Reaction ◽  
Earnings Information ◽  
Bank Stock Returns ◽  
Stock Price Reaction ◽  
Bank Stock

Numerous studies have documented that most of the stock price reaction to earnings announcements have occurred by the time the earnings information is made public. This study considers stock price reaction during the time period between the end of the accounting calendar when the forthcoming earnings information is ostensibly available to top management and the earnings release date to measure anticipatory price responses to imminent quarterly earnings announcements. Using bank stocks, the results indicate that portfolios composed of banks that eventually announce improved earnings show significant positive abnormal returns soon after the close of the accounting quarter while portfolios composed of banks that eventually publicize poor profit performance exhibit significant negative abnormal returns.

Effect of quarterly earnings announcement under different market conditions

2014 ◽  
Vol 6 (2) ◽  
pp. 128-154 ◽  
Author(s):  
Santu Das ◽  
Jamini Kanta Pattanayak ◽  
Pramod Pathak
Keyword(s):  
Event Study ◽  
Stock Price ◽  
Earnings Announcements ◽  
Market Condition ◽  
Market Conditions ◽  
Price Movement ◽  
Earnings Announcement ◽  
Content Type ◽  
Quarterly Earnings ◽  
The Impact

Purpose – The main purpose of this research study is to investigate the impact of quarterly earnings announcements on stock price movement of the firms constituting the SENSEX under two different market conditions – booming followed by recessionary. Analysis of price effect of quarterly earnings announcements during the five-year period prior to trading suspension, which is also characterized by a booming market condition have been made. Similar analysis during the five-year period following the trading suspension and marked by recessionary market condition has also been carried out side by side. Design/methodology/approach – Event study methodology using daily returns and market model has been used for the purpose of analyzing the quarterly earnings announcement effects on the security prices of the firms. A sign test has also been used along with the event study. Findings – The study reveals that quarterly earnings announcement does not have statistically significant effect on stock returns during the booming as well as the recessionary market conditions. The impact of quarterly earnings announcements on stock price movement of firms constituting the SENSEX has been similar for both periods undertaken in the study. Research limitations/implications – The study has been undertaken using the firms listed in BSE SENSEX. The effect of the quarterly earnings announcement with reference to firms listed in other indices, if covered, may provide different sets of results. Originality/value – The paper identifies the informational value of quarterly earnings announcement of BSE-SENSEX.

The Earnings Event-Time Seasonal and the Calendar-Time Seasonal in Stock Returns: Naive Use of Earnings Information or Announcement Timing Effect?

1995 ◽  
Vol 10 (4) ◽  
pp. 677-698 ◽  
Author(s):  
Ray Ball ◽  
Eli Bartov
Keyword(s):  
Stock Returns ◽  
Abnormal Returns ◽  
Calendar Time ◽  
Earnings Announcement ◽  
Future Earnings ◽  
Quarterly Earnings ◽  
Earnings Information ◽  
Event Time ◽  
Unexpected Earnings ◽  
Day Of The Week

We document a pattern in the day-of-the-week timing of future earnings announcements that is predictable from knowledge of the current quarter's earnings. The pattern mimics the predictable (+, +, 0, -) dependence previously reported in both seasonally differenced quarterly earnings themselves and in estimated abnormal returns at future quarterly earnings announcement dates (the “SUE effect”; see Rendleman, Jones, and Latané [1987]; Bernard and Thomas [1990]). The predictability of abnormal returns at future earnings announcement dates therefore is not independent of the well-documented day-of-the-week seasonal in stock returns (the “DOW effect”; see Osborne [1962]; Cross [1973]; French [1980]; Gibbons and Hess [1981]). Although the DOW effect is too small to fully explain the SUE effect, it appears to contribute to it, since both past SUE and current earnings announcement DOW are incremental in explaining announcement-day estimated abnormal returns. The unclear role of size and the presence of errors in estimating both unexpected earnings and its announcement day suggest caution in interpreting these results.

Are family firms more optimistic than non-family firms?

2019 ◽  
Vol 32 (3) ◽  
pp. 399-416 ◽  
Author(s):  
Xuan Huang ◽  
Fei Kang
Keyword(s):  
Family Firms ◽  
Earnings Announcements ◽  
Family Ownership ◽  
Press Releases ◽  
Firm Level ◽  
Content Type ◽  
Alternative Measures ◽  
Disclosure Tone ◽  
The Impact ◽  
Earnings Press Releases

Purpose The purpose of this study is to investigate how family ownership affects the disclosure tone of firm earnings press releases. Design/methodology/approach Following prior literature, this study defines family firms as those in which members of the founding families continue to hold positions in top management, to sit on the board or to be blockholders. The disclosure tone of earnings press releases is measured by the level of optimism in firms’ earnings announcements using Loughran and McDonald’s (2011) word classifications. Multivariate analysis is performed to examine the impact of family ownership on firms’ disclosure tone. Additional analysis includes controlling for different firm-level characteristics and using alternative measures of disclosure tone. Findings This study documents that the disclosure tone of earnings announcements is more optimistic for family firms than for non-family firms. The result implies that family owners’ large undiversified equity position in their business results in strong incentives for them to issue more positive earnings announcements to maintain high stock performance. Further analysis reveals that the results are mainly driven by family firms with founder CEOs. The results are robust to controls for corporate governance characteristics and to alternative measures of corporate disclosure tone. Originality/value The findings of this study contribute to the literature that examines factors associated with the determinants of the tone in firms’ earnings announcements. In addition, this study adds to the extant literature on family firms by providing useful insight into the influence of family control on corporate voluntary disclosure.

scholarly journals Does earnings surprise determine the timing of the earnings announcement? Evidence from earnings announcements of Indian companies

2020 ◽  
Vol 5 (1) ◽  
pp. 119-134
Author(s):  
Krishna Prasad ◽  
Nandan Prabhu
Keyword(s):  
Earnings Announcements ◽  
Earnings Announcement ◽  
Content Type ◽  
Quarterly Earnings ◽  
Earnings Surprise ◽  
Market Responses ◽  
Earnings Surprises ◽  
Study Methodology ◽  
The Difference ◽  
Reported Earnings

PurposeThe purpose of this study is to investigate whether the earnings surprise influences decision to make earnings announcements during or after the trading hours is influenced by the earnings surprise resulting from the difference between consensus earnings estimates and the actual reported earnings.Design/methodology/approachEvent study methodology was employed to test the hypotheses relating to earnings surprise and timing of earnings announcements. Twelve quarterly earnings announcements of 30 companies, drawn from BSE SENSEX of India, were studied to test the hypothesized relationships.FindingsThe study has found statistically significant differences in the market responses to the earnings announcements made during and after the trading hours. The market demonstrated a negative response to the earnings announcements made after the trading hours. Further, the results of the logistic regression have shown that the presence of significant earnings surprises is likely to induce firms to make earnings announcements after the trading hours. The results indicate that those firms that intend to reduce the overreaction and underreaction to earnings surprises are likely to make earnings announcements after the trading hours.Originality/valueThis paper highlights the market response to the earnings announcement made during and after the regular trading hour. Further, the paper examines if the earnings surprise influences the decision to announce the results.

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