Does the Annual General Meeting Involve the Release of Relevant Information in Non-Common Law Markets? Evidence from Spain

Abstract

Although the investigation of the effects of corporate events on stock prices is a well-established line of research in accounting and finance, only a limited attention has been devoted to one of the most important corporate events: the Annual General Meeting (AGM). The current empirical evidence is not only scarce, but is also limited to the US and the UK, countries whose legal tradition is based on the common law. In these countries the AGM has been found to involve the release of relevant information to the market. Nevertheless, since the influential paper by La Porta et al. (1998), evidence reported in common law countries cannot be automatically extrapolated to countries with a different legal tradition. In this paper, we have investigated the effects of AGM on stock returns, volatility and trading volumes, in the Spanish stock market. As expected, our results indicate that the information content of the AGM is lower in Spain than in common law countries. In fact, the AGM does not have any significant effect in any of the three indicators. After examining possible explanations, we conclude that no relevant information seems to be released to the market during AGM, thus having zero impact on returns, volatility and trading volumes. Nevertheless, the behavior of cumulative returns and trading volumes suggests that market participants expect the release of relevant information during these meetings.

Keywords: event studies, annual general meeting, stock returns, volatility, trading volumes

JEL Classification: G21