Home About us Contact
|
Home About us Contact | ||
|
|
||
Earnings Announcements (earning + announcement)
Selected AbstractsInvestor and Analyst Reactions to Earnings Announcements of Related Firms: An Empirical AnalysisJOURNAL OF ACCOUNTING RESEARCH, Issue 5 2002Sundaresh Ramnath In this article I examine the response of investors and analysts of nonannouncing firms to the earnings report of the first announcers in the industry. The error in the earnings forecast of the first announcer is found to be informative about the errors in the contemporaneous earnings forecasts of subsequent announcers in the industry. However, investors and analysts do not appear to fully incorporate the information from the first announcers' news in their revised earnings expectations for subsequent announcers. This apparent underreaction to the first announcers' news leads to predictable stock returns for subsequent announcers in the days following the first announcement. Results of this study can be seen as further evidence of investor and analyst underreaction to publicly available information. [source] Factors Associated with Differences in the Magnitude of Abnormal Returns Around NYSE Versus Nasdaq Firms' Earnings AnnouncementsJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 9-10 2001Youngsoon Susan Cheon This study provides an explanation for the ,exchange effect' puzzle documented in prior accounting research. Grant (1980) finds that the magnitude of earnings announcement week abnormal returns is higher, on average, for firms traded over-the-counter than for NYSE firms. Atiase (1987) shows that this incremental ,exchange effect' persists even after controlling for firm size. We investigate potential explanations for this incremental exchange effect. We first show that even after controlling for differences in firm size, Nasdaq firms have less rich information environments and enjoy greater growth opportunities than NYSE firms. We then investigate whether differential predisclosure information environments and/or growth opportunities can explain the incremental exchange effect. The results indicate that although the absolute magnitude of the earnings announcement-related abnormal returns is inversely related to proxies for the amount of predisclosure information, the incremental exchange effect cannot be explained by differences in the predisclosure information environment. In contrast, after controlling for differences in growth opportunities across NYSE versus Nasdaq firms, and investors' heightened sensitivity to Nasdaq firms' growth opportunities in particular, there is no significant incremental exchange effect (whether or not we control for predisclosure information). These results suggest that the incremental exchange effect puzzle documented in prior research is more likely to reflect growth-related phenomena than differences in the predisclosure information environment. [source] Discussion of Factors Associated with Differences in the Magnitude of Abnormal Returns Around NYSE Versus Nasdaq Firms' Earnings AnnouncementsJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 9-10 2001Peter Easton First page of article [source] Global Market Segmentation and Patterns in Stock Market Reaction to US Earnings Announcements: Further EvidenceJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2005Tony Kang The purpose of this study is to investigate why the information content of US earnings announcements of non-US firms cross-listing in the US varies with the degree of capital market segmentation in the cross-listing firms' countries of domicile. My evidence shows that indirect barriers to investing (i.e., accounting rules and liquidity differences) rather than direct investment barriers (i.e., investment restrictions) mainly account for this difference. After controlling for the level of accounting disclosure in a firm's country of domicile, I do not observe a systematic difference in the size of market's reaction to earnings announcements depending on the degree of market segmentation in the firm's country of domicile. This study contributes to the literature by providing evidence that accounting disclosure plays an important role in the integration of global capital markets. [source] Short-Selling Prior to Earnings AnnouncementsTHE JOURNAL OF FINANCE, Issue 4 2004Stephen E. Christophe ABSTRACT This paper examines short-sales transactions in the five days prior to earnings announcements of 913 Nasdaq-listed firms. The tests provide evidence of informed trading in pre-announcement short-selling because they reveal that abnormal short-selling is significantly linked to post-announcement stock returns. Also, the tests indicate that short-sellers typically are more active in stocks with low book-to-market valuations or low SUEs. The levels of pre-announcement short-selling, however, mostly appear to reflect firm-specific information rather than these fundamental financial characteristics. We believe that these results should encourage financial market regulators to consider providing more extensive and timely disclosures of short-selling to investors. [source] Options and earnings announcements: an empirical study of volatility, trading volume, open interest and liquidityEUROPEAN FINANCIAL MANAGEMENT, Issue 2 2000Monique, W.M. Donders In this paper we study the impact of earnings announcements on implied volatility, trading volume, open interest and spreads in the stock options market. We find that implied volatility increases before announcement days and drops afterwards. Also option trading volume is higher around announcement days. During the days before the announcement open interest tends to increase, while it returns to regular levels afterwards. Changes in the quoted spread largely respond to higher trading volume and changes in implied volatility. The effective spread increases on the event day and on the first two days following the earnings announcement. [source] Lockup and Voluntary Earnings Forecast Disclosure in IPOsFINANCIAL MANAGEMENT, Issue 3 2007Beng Soon Chong Associate Professors We examine the relation between lockup length and voluntary earnings forecast disclosures for IPOs in Singapore. Unlike firms in the United States, companies in Singapore are allowed to provide earnings forecasts in their IPO prospectuses. We find that forecasters are more likely to accept longer lockup periods, so that the lockup expires after the first post-IPO earnings announcement. Our study also shows that because the lockup agreement removes personal incentives to issue aggressive forecasts, IPO firms tend to issue conservative forecasts. Overall, our results suggest that the lockup mechanism adds credibility to the earnings forecast given in the IPO prospectus. [source] The Determinants of Implied Volatility: A Test Using LIFFE Option PricesJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2000L. Copeland This paper presents and tests a model of the volatility of individual companies' stocks, using implied volatilities derived from option prices. The data comes from traded options quoted on the London International Financial Futures Exchange. The model relates equity volatilities to corporate earnings announcements, interest-rate volatility and to four determining variables representing leverage, the degree of fixed-rate debt, asset duration and cash flow inflation indexation. The model predicts that equity volatility is positively related to duration and leverage and negatively related to the degree of inflation indexation and the proportion of fixed-rate debt in the capital structure. Empirical results suggest that duration, the proportion of fixed-rate debt, and leverage are significantly related to implied volatility. Regressions using all four determining variables explain approximately 30% of the cross-sectional variation in volatility. Time series tests confirm an expected drop in volatility shortly after the earnings announcement and in most cases a positive relationship between the volatility of the stock and the volatility of interest rates. [source] Information Uncertainty Risk and Seasonality in International Stock MarketsASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 2 2010Dongcheol Kim G14; G12 Abstract A parsimonious two-factor model containing the market risk factor and a risk factor related to earnings information uncertainty has been developed to explain the seasonal regularity of January in international stock markets. This two-factor model shows apparently stronger power in explaining time-series behavior of stock returns and the cross-section of average stock returns in all major developed countries than do the competing models. Furthermore, the arbitrage residual return in January, which is the difference in the average residual returns between the smallest and largest size portfolios, is statistically insignificant in all the countries. These results indicate that the risk factor related to earnings information uncertainty plays a special role in explaining the seasonal pattern of stock returns in January, and that January might be a month that potentially tends to differentially reward stocks having uncertain earnings information. It could be argued, therefore, that large returns in January might be a risk premium for taking information uncertainty risk concerning earnings and unexpected earnings surprises faced at the earnings announcement, and that the previously reported strong January seasonality in stock returns might result from the use of misspecified models in adjusting for risk. [source] The North American Industry Classification System and Its Implications for Accounting Research,CONTEMPORARY ACCOUNTING RESEARCH, Issue 4 2003Jayanthi Krishnan Abstract Industry classification is an important component of the methodological infrastructure of accounting research. Researchers have generally used the Standard Industrial Classification (SIC) system for assigning firms to industries. In 1999, the major statistical agencies of Canada, Mexico, and the United States began implementing the North American Industry Classification System (NAICS). The new scheme changes industry classification by introducing production as the basis for grouping firms, creating 358 new industries, extensively rearranging SIC categories, and establishing uniformity across all NAFTA nations. We examine the implications of the change for accounting research. We first assess NAICS's effectiveness in forming industry groups. Following Guenther and Rosman 1994, we use financial ratio variances to measure intra-industry homogeneity and find that NAICS offers some improvement over the SIC system in defining manufacturing, transportation, and service industries. We also evaluate whether NAICS might have an impact on empirical research by reproducing part of Lang and Lundholm's 1996 study of information-transfer and industry effects. Using SIC delineations, they focus on whether industry conditions or the level of competition is the main source of uncertainty resolved by earnings announcements. Across all levels of aggregation, we find inferences are similar using either SIC or NAICS. How-ever, we also observe that the regression coefficients in Lang and Lundholm's model show smaller intra-industry dispersion for NAICS, relative to SIC, definitions. Overall, the results suggest that NAICS definitions lead to more cohesive industries. Because of this, researchers may encounter some differences in using NAICS-industry definitions, rather than SIC, but these will depend on research design and industry composition of the sample. [source] Market Response to Earnings Surprises Conditional on Reasons for an Auditor Change,CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2002Karl E. Hackenbrack Abstract Our interest in this study is the relative informativeness of earnings announcements reported before and after Form 8-K disclosures of the reason for an auditor change. We appeal to several models that predict that the market's response to an earnings surprise is positively related to the perceived precision of the earnings report. We predict that the Form 8-K reason disclosures aid investors in updating their expectations of earnings precision by providing useful information about the financial reporting process that produces the earnings report. For 802 auditor changes from late 1991 through late 1997, the average price response per unit of earnings surprise is lower subsequent to an auditor change for companies that switched for disagreement-related or fee-related reasons and higher for those that switched for service-related reasons. This paper provides further evidence on the effects of differential earnings quality on differences in the returns-earnings relation across companies and over time as well as the efficacy of Form 8-K disclosures of reasons for auditor changes. [source] Analysing Perceived Downside Risk: the Component Value-at-Risk FrameworkEUROPEAN FINANCIAL MANAGEMENT, Issue 4 2004Winfried G. Hallerbach G3; G32; G1; G14 Abstract Multinational companies face increasing risks arising from external risk factors, e.g. exchange rates, interest rates and commodity prices, which they have learned to hedge using derivatives. However, despite increasing disclosure requirements, a firm's net risk profile may not be transparent to shareholders. We develop the ,Component Value-at-Risk (VaR)' framework for companies to identify the multi-dimensional downside risk profile as perceived by shareholders. This framework allows for decomposing downside risk into components that are attributable to each of the underlying risk factors. The firm can compare this perceived VaR, including its composition and dynamics, to an internal VaR based on net exposures as it is known to the company. Any differences may lead to surprises at times of earnings announcements and thus constitute a litigation threat to the firm. It may reduce this information asymmetry through targeted communication efforts. [source] Options and earnings announcements: an empirical study of volatility, trading volume, open interest and liquidityEUROPEAN FINANCIAL MANAGEMENT, Issue 2 2000Monique, W.M. Donders In this paper we study the impact of earnings announcements on implied volatility, trading volume, open interest and spreads in the stock options market. We find that implied volatility increases before announcement days and drops afterwards. Also option trading volume is higher around announcement days. During the days before the announcement open interest tends to increase, while it returns to regular levels afterwards. Changes in the quoted spread largely respond to higher trading volume and changes in implied volatility. The effective spread increases on the event day and on the first two days following the earnings announcement. [source] Are active fund managers collectors of private information or fast interpreters of public information?ACCOUNTING & FINANCE, Issue 3 2010David R. Gallagher G23 Abstract Recent studies of fund manager performance find evidence of outperformance. However limited research exists as to whether such outperformance is because of privately collected information, or merely expedient interpretation of publicly released information. In this study, we examine the trade sequences of active Australian equity fund managers around earnings announcements to provide insights into the source of fund managers' superior information. We document an increased occurrence of buy-sell trade sequences around good-news earnings announcements. The evidence is consistent with fund managers having both private information about forthcoming good-news earnings announcements and being ,short-term profiteers'. We find no evidence that fund managers have private information about forthcoming bad-news earnings announcements. However, we do find an increase in the frequency of fund managers not trading before bad-news earnings announcements only to subsequently sell during announcements. [source] Strategic timing of earnings announcements?ACCOUNTING & FINANCE, Issue 3 2010Cameron Truong M40; G14 Abstract Using firm-specific regressions, I show that earnings response coefficient differ across firms. However, there is no evidence of differential earnings response coefficient to a certain earnings announcement time. By switching to a different announcement time from its preferred time, a firm does not gain a softer market reaction. I compare research results from a firm-specific method and from a pooled time-series and cross-sectional method and demonstrate that they differ significantly due to large heterogeneity across firms. I suggest that researchers should adopt a firm-specific approach to avoid misleading results and to achieve improved estimations. [source] Earnings characteristics and analysts' differential interpretation of earnings announcements: An empirical analysisACCOUNTING & FINANCE, Issue 2 2009Anwer S. Ahmed G14; M41 Abstract This study provides empirical evidence on factors that drive differential interpretation of earnings announcements. We document that Kandel and Pearson's forecast measures of differential interpretation are decreasing in proxies for earnings quality and pre-announcement information quality. This evidence yields new and useful insights regarding which earnings announcements are less likely to generate newfound disagreement among analysts and investors. Recent research suggests that investor disagreement can increase investment risk, increase the cost of capital, and cause stock prices to deviate from fundamental value. Therefore, our results support prior intuition that increasing the quality of earnings and pre-announcement information can improve the efficiency of capital markets. [source] Alternative event study methodology for detecting dividend signals in the context of joint dividend and earnings announcementsACCOUNTING & FINANCE, Issue 2 2009Warwick Anderson C51; D46; G14; N27 Abstract Friction models are used to examine the market reaction to the simultaneous disclosure of earnings and dividends in a thin-trading environment. Friction modelling, a procedure using maximum likelihood estimation, can be used to replace both the market model and restricted least-squares regression in event studies where there are two quantifiable variables and a number of possible interaction effects associated with the news that constitutes the study's event. The results indicate that the dividend signal can be separated from the earnings signal. [source] Initial Evidence on the Role of Accounting Earnings in the Bond MarketJOURNAL OF ACCOUNTING RESEARCH, Issue 3 2009PETER D. EASTON ABSTRACT We document that: (1) the incidence of bond trade increases during the days surrounding earnings announcements, (2) there is a bond-price reaction to the announcement of earnings, and (3) there is a positive association between annual bond returns and both annual changes in earnings and annual analysts' forecast errors. All of these effects are larger when earnings convey bad news or when the underlying bond is more risky. Taken together, our results suggest that the nonlinear payoff structure of bond securities affects the role of accounting earnings in the bond market. [source] How Much New Information Is There in Earnings?JOURNAL OF ACCOUNTING RESEARCH, Issue 5 2008RAY BALL ABSTRACT We quantify the relative importance of earnings announcements in providing new information to the share market, using the R2 in a regression of securities' calendar-year returns on their four quarterly earnings-announcement "window" returns. The R2, which averages approximately 5% to 9%, measures the proportion of total information incorporated in share prices annually that is associated with earnings announcements. We conclude that the average quarterly announcement is associated with approximately 1% to 2% of total annual information, thus providing a modest but not overwhelming amount of incremental information to the market. The results are consistent with the view that the primary economic role of reported earnings is not to provide timely new information to the share market. By inference, that role lies elsewhere, for example, in settling debt and compensation contracts and in disciplining prior information, including more timely managerial disclosures of information originating in the firm's accounting system. The relative informativeness of earnings announcements is a concave function of size. Increased information during earnings-announcement windows in recent years is due only in part to increased concurrent releases of management forecasts. There is no evidence of abnormal information arrival in the weeks surrounding earnings announcements. Substantial information is released in management forecasts and in analyst forecast revisions prior (but not subsequent) to earnings announcements. [source] The Extreme Future Stock Returns Following I/B/E/S Earnings SurprisesJOURNAL OF ACCOUNTING RESEARCH, Issue 5 2006JEFFREY T. DOYLE ABSTRACT We investigate the stock returns subsequent to quarterly earnings surprises, where the benchmark for an earnings surprise is the consensus analyst forecast. By defining the surprise relative to an analyst forecast rather than a time-series model of expected earnings, we document returns subsequent to earnings announcements that are much larger, persist for much longer, and are more heavily concentrated in the long portion of the hedge portfolio than shown in previous studies. We show that our results hold after controlling for risk and previously documented anomalies, and are positive for every quarter between 1988 and 2000. Finally, we explore the financial results and information environment of firms with extreme earnings surprises and find that they tend to be "neglected" stocks with relatively high book-to-market ratios, low analyst coverage, and high analyst forecast dispersion. In the three subsequent years, firms with extreme positive earnings surprises tend to have persistent earnings surprises in the same direction, strong growth in cash flows and earnings, and large increases in analyst coverage, relative to firms with extreme negative earnings surprises. We also show that the returns to the earnings surprise strategy are highest in the quartile of firms where transaction costs are highest and institutional investor interest is lowest, consistent with the idea that market inefficiencies are more prevalent when frictions make it difficult for large, sophisticated investors to exploit the inefficiencies. [source] Evidence That Management Earnings Forecasts Do Not Fully Incorporate Information in Prior Forecast ErrorsJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2009Weihong Xu Abstract:, This paper investigates whether managers fully incorporate the implications of their prior earnings forecast errors into their future earnings forecasts and, if not, whether this behavior is related to the post-earnings announcement drift. I find a positive association in consecutive management forecast errors, suggesting that managers underestimate the future implications of past earnings information when forecasting earnings. I also find that managers underestimate the information in their prior forecast errors to a greater extent when they make earnings forecasts with a longer horizon. Finally, I find that, similar to managers, the market also underreacts to earnings information in management forecast errors, which leads to predictable stock returns following earnings announcements. [source] Implied Standard Deviations and Post-earnings Announcement VolatilityJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 3-4 2002Daniella Acker This paper investigates volatility increases following annual earnings announcements. Standard deviations implied by options prices are used to show that announcements of bad news result in a lower volatility increase than those of good news, and delay the increase by a day. Reports that are difficult to interpret also delay the volatility increase. This delay is incremental to that caused by reporting bad news, although the effect of bad news on slowing down the reaction time is dominant. It is argued that the delays reflect market uncertainty about the implications of the news. [source] The Determinants of Implied Volatility: A Test Using LIFFE Option PricesJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2000L. Copeland This paper presents and tests a model of the volatility of individual companies' stocks, using implied volatilities derived from option prices. The data comes from traded options quoted on the London International Financial Futures Exchange. The model relates equity volatilities to corporate earnings announcements, interest-rate volatility and to four determining variables representing leverage, the degree of fixed-rate debt, asset duration and cash flow inflation indexation. The model predicts that equity volatility is positively related to duration and leverage and negatively related to the degree of inflation indexation and the proportion of fixed-rate debt in the capital structure. Empirical results suggest that duration, the proportion of fixed-rate debt, and leverage are significantly related to implied volatility. Regressions using all four determining variables explain approximately 30% of the cross-sectional variation in volatility. Time series tests confirm an expected drop in volatility shortly after the earnings announcement and in most cases a positive relationship between the volatility of the stock and the volatility of interest rates. [source] Securities Regulation, the Timing of Annual Report Release, and Market Implications: Evidence from ChinaJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2006In-Mu Haw Using a sample of earnings announcements of Chinese firms in the fiscal years 1994,1999, covering the periods before and after the introduction of a regulation to stagger the release of annual reports, we reassess the relation between earnings news and the timing of earnings announcements. We find that even though the reporting lag has significantly shortened as a result of the regulation, the pattern whereby good news is announced earlier than bad news persists. We then examine the behavior of stock prices before earnings announcements and find some indication of information leakage. These findings suggest that the regulation had the expected effect of reducing reporting delay and earnings release clustering. Yet, it did not appear to reduce the extent of the pre-announcement leakage of information. [source] Global Market Segmentation and Patterns in Stock Market Reaction to US Earnings Announcements: Further EvidenceJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2005Tony Kang The purpose of this study is to investigate why the information content of US earnings announcements of non-US firms cross-listing in the US varies with the degree of capital market segmentation in the cross-listing firms' countries of domicile. My evidence shows that indirect barriers to investing (i.e., accounting rules and liquidity differences) rather than direct investment barriers (i.e., investment restrictions) mainly account for this difference. After controlling for the level of accounting disclosure in a firm's country of domicile, I do not observe a systematic difference in the size of market's reaction to earnings announcements depending on the degree of market segmentation in the firm's country of domicile. This study contributes to the literature by providing evidence that accounting disclosure plays an important role in the integration of global capital markets. [source] Driven to Distraction: Extraneous Events and Underreaction to Earnings NewsTHE JOURNAL OF FINANCE, Issue 5 2009DAVID HIRSHLEIFER ABSTRACT Recent studies propose that limited investor attention causes market underreactions. This paper directly tests this explanation by measuring the information load faced by investors. The,investor distraction hypothesis,holds that extraneous news inhibits market reactions to relevant news. We find that the immediate price and volume reaction to a firm's earnings surprise is much weaker, and post-announcement drift much stronger, when a greater number of same-day earnings announcements are made by other firms. We evaluate the economic importance of distraction effects through a trading strategy, which yields substantial alphas. Industry-unrelated news and large earnings surprises have a stronger distracting effect. [source] Volatility Information Trading in the Option MarketTHE JOURNAL OF FINANCE, Issue 3 2008SOPHIE X. NI ABSTRACT This paper investigates informed trading on stock volatility in the option market. We construct non-market maker net demand for volatility from the trading volume of individual equity options and find that this demand is informative about the future realized volatility of underlying stocks. We also find that the impact of volatility demand on option prices is positive. More importantly, the price impact increases by 40% as informational asymmetry about stock volatility intensifies in the days leading up to earnings announcements and diminishes to its normal level soon after the volatility uncertainty is resolved. [source] Information, Trading, and Product Market Interactions: Cross-sectional Implications of Informed TradingTHE JOURNAL OF FINANCE, Issue 1 2008HEATHER E. TOOKES ABSTRACT I present a simple model of informed trading in which asset values are derived from imperfectly competitive product markets and private information events occur at individual firms. The model predicts that informed traders may have incentives to make information-based trades in the stocks of competitors, especially when events occur at firms with large market shares. In the context of 759 earnings announcements, I use intraday transactions data to test the hypothesis that net order flow and returns in the stocks of nonannouncing competitors have information content for announcing firms. [source] Short-Selling Prior to Earnings AnnouncementsTHE JOURNAL OF FINANCE, Issue 4 2004Stephen E. Christophe ABSTRACT This paper examines short-sales transactions in the five days prior to earnings announcements of 913 Nasdaq-listed firms. The tests provide evidence of informed trading in pre-announcement short-selling because they reveal that abnormal short-selling is significantly linked to post-announcement stock returns. Also, the tests indicate that short-sellers typically are more active in stocks with low book-to-market valuations or low SUEs. The levels of pre-announcement short-selling, however, mostly appear to reflect firm-specific information rather than these fundamental financial characteristics. We believe that these results should encourage financial market regulators to consider providing more extensive and timely disclosures of short-selling to investors. [source] | ||||||||||||||||||||||