The Preholiday Corporate Announcement Effect

Abstract

We find that investors react more favorably to announcements of share repurchases, SEOs, earnings, dividend changes, and acquisitions if the announcement is made immediately prior to or on holidays. Preholiday corporate announcements are associated with more positive reactions for favorable events and less negative reactions for unfavorable events. This effect is robust to controls for market conditions and a selection bias, is accompanied by subsequent reversals, and is present in several international markets. Our findings suggest that predictable individual mood changes can cause biases in market reactions to firm-specific news.

Keywords: Corporate announcements, market reaction, preholiday effect, mood, market efficiency

JEL Classification: G14, G30