Are earnings predictable? Evidence from equity issues and buyback announcements

36 Pages Posted: 6 Apr 2015 Last revised: 24 Sep 2018

Shahram Amini

University of Denver - Daniels College of Business

Vijay Singal

Virginia Tech

Date Written: September 11, 2018

Abstract

We find that earnings announcements that follow equity issues and buyback announcements have predictable market reactions. Four-factor abnormal returns to earnings following buyback announcements are higher by 5.1% than similar returns to earnings following equity issues over the (-1, 30) window; the difference is 2.2% when unadjusted returns are used. The drift in these returns is unrelated and distinct from the post-earnings announcement drift, and less affected by benchmarking issues that may influence long-horizon returns. The evidence is consistent with the notion that markets do not fully reflect information that is embedded in voluntary corporate actions.

Keywords: Earnings predictability, repurchases/buybacks, equity issues, SEOs, information asymmetry, market efficiency

JEL Classification: G14, G32, G35

Suggested Citation

Amini, Shahram and Singal, Vijay, Are earnings predictable? Evidence from equity issues and buyback announcements (September 11, 2018). Available at SSRN: https://ssrn.com/abstract=2589966 or http://dx.doi.org/10.2139/ssrn.2589966

Shahram Amini (Contact Author)

University of Denver - Daniels College of Business ( email )

2101 S. University Blvd.
Denver, CO 80208
United States

HOME PAGE: http://https://daniels.du.edu/directory/shahram-amini/

Vijay Singal

Virginia Tech ( email )

Blacksburg, VA 24061
United States
5402317750 (Phone)

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