Post-Earnings-Announcement Drift in Global Markets: Evidence from an Information Shock
Review of Financial Studies 28, 1242-1283. 2015
52 Pages Posted: 24 May 2013 Last revised: 9 Jun 2015
Date Written: March 1, 2014
Abstract
We investigate whether and how an exogenous and unprecedented improvement in the quality of non-U.S. firms’ financial reporting affects post-earnings-announcement drift (PEAD). We find that PEAD declines after the information shock, and the decrease is more pronounced among firms with fewer concurrent earnings announcements, higher institutional holdings, and lower limits-to-arbitrage, and in countries with stronger enforcement. In addition, the decrease in PEAD is primarily driven by firms with greater changes in financial reporting, and an increase in analyst forecast accuracy, institutional ownership, and liquidity. Taken together, these findings support the mispricing explanation of PEAD in an international setting.
Keywords: Post-Earnings-Announcement Drift, IFRS, Global
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