Are Friday Announcements Special? Overcoming Selection Bias
American Finance Association 2016 San Francisco Meetings
52 Pages Posted: 21 Oct 2012 Last revised: 21 Apr 2016
Date Written: April 20, 2016
We report reduced market response to Friday announcements of dividend changes, seasoned equity offerings, open-market share repurchases, earnings, and mergers, which is seemingly consistent with the notion of investor inattention on Fridays. However, we show that these findings are an outcome of selection bias. Firms that make announcements on Fridays experience reduced market response on any weekday and have common unobserved characteristics across announcement types. After correcting for selection bias, there is no evidence that investors pay less attention to announcements made on Fridays relative to other weekdays. The method introduced here is applicable to other studies in which an exogenous factor influencing firm performance can actually be associated with firm characteristics.
Keywords: Inattention; Friday; Selection bias; Corporate announcements; Market reaction
JEL Classification: G11, G14, G34, G35
Suggested Citation: Suggested Citation