Beaver (1968) Revisited: Has the Information Content of Annual Earnings Announcements Declined in the Past Three Decades?

38 Pages Posted: 11 Feb 2000

See all articles by Wayne R. Landsman

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Edward L. Maydew

University of North Carolina at Chapel Hill

Date Written: May 2001

Abstract

In 1968, Beaver published his seminal paper on the information content of earnings announcements, establishing that both trading volume and return volatility increase at the time of earnings announcements. Thirty-some years after Beaver's study, concerns have been raised about a perceived degradation in the informativeness of earnings because of the increasing availability of timely non-accounting information and the increasing rate of technological innovation and change not reflected in the accounting system in a timely manner.

In this paper we examine changes over the past thirty years in the information content of earnings using the two metrics from Beaver (1968): abnormal trading volume and volatility. In contrast to the conventional wisdom, we find no evidence of a decline in the informativeness of accounting information over the past thirty years, as measured by both abnormal trading volume and return volatility around quarterly earnings announcements. If anything, our results suggest an increase over time in the informativeness of quarterly earnings announcements. Variables reflecting changes in firm-specific factors account for a portion of the observed increase.

JEL Classification: M41, G12, G14

Suggested Citation

Landsman, Wayne R. and Maydew, Edward L., Beaver (1968) Revisited: Has the Information Content of Annual Earnings Announcements Declined in the Past Three Decades? (May 2001). Available at SSRN: https://ssrn.com/abstract=204068 or http://dx.doi.org/10.2139/ssrn.204068

Wayne R. Landsman (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Edward L. Maydew

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)

HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
4,282
Abstract Views
15,433
rank
2,244
PlumX Metrics