Market Response to Mandatory Pre-Earnings-Announcements - Evidence from Ad-Hoc Disclosures in Germany
48 Pages Posted: 18 Aug 2010 Last revised: 12 May 2012
Date Written: May 11, 2012
In this study, we examine the market reaction to ad hoc disclosures, a form of early disclosure unique to Germany, associated with periodic financial reports using data from the German stock market for the period 2003--2009. Although the immediate release of ad hoc disclosures is mandatory if subsequent periodic reports contain significant surprises, a considerable number of these disclosures is published on the same date as the corresponding report. While ad hoc disclosures, in general, lead to larger market reactions than periodic reports, results indicate that the majority of contemporaneous ad hoc disclosures are less important. An analysis of earnings surprises shows that market reaction to a similar earnings surprise is larger when the information is communicated through an ad hoc disclosure than when through a regular periodic report. We interpret a stronger market reaction as perceived higher persistence of the earnings surprise. Investigating the announcement timing, our analysis suggests that positive news that has persistent impact on future earnings is more likely to be announced early via ad hoc disclosure, while permanent disappointments tend to be announced with a delay.
Keywords: ad hoc disclosure, earnings announcement, earnings surprise, market reaction
JEL Classification: G14, K22, M41
Suggested Citation: Suggested Citation