How Important are Earnings Announcements as an Information Source?*

46 Pages Posted: 3 Sep 2009

See all articles by Sudipta Basu

Sudipta Basu

Temple University - Department of Accounting

Truong X. Duong

Iowa State University - Department of Accounting and Finance

Stanimir Markov

University of Texas at Dallas - Naveen Jindal School of Management

Eng Joo Tan

affiliation not provided to SSRN

Date Written: September 1, 2009

Abstract

Earnings announcement days on average provide more information to the stock market than any other days in each quarter. In particular, the proportions of the variation in annual returns explained by returns on days with dividend announcements, management forecasts, preannouncements, or 10-K and 10-Q filings are consistently lower than the 11% explained by earnings announcement days. Only the largest realized absolute daily returns in a quarter match the ability of earnings announcement returns to explain annual returns. We conclude that earnings announcements are individually the most important source of new information in the equity market. Earnings announcement days are likely to remain a preferred setting for testing theories about production, dissemination, and use of information (both accounting and non-accounting) in the equity market.

Keywords: Earnings information arrival days, conditional information content, information monopoly

Suggested Citation

Basu, Sudipta and Duong, Truong X. and Markov, Stanimir and Tan, Eng Joo, How Important are Earnings Announcements as an Information Source?* (September 1, 2009). Available at SSRN: https://ssrn.com/abstract=1466400 or http://dx.doi.org/10.2139/ssrn.1466400

Sudipta Basu (Contact Author)

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States
215.204.0489 (Phone)
215.204.5587 (Fax)

Truong X. Duong

Iowa State University - Department of Accounting and Finance ( email )

College of Business
Ames, IA 50011-2063
United States

Stanimir Markov

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States
972 883 5166 (Phone)

Eng Joo Tan

affiliation not provided to SSRN ( email )

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