How Do Investors Interpret Announcements of Earnings Delays?

Journal of Applied Corporate Finance, Winter 2013

23 Pages Posted: 14 Apr 2013

See all articles by Tiago Duarte-Silva

Tiago Duarte-Silva

Charles River Associates (CRA); Boston College

Huijing Fu

Texas Christian University

Christopher F. Noe

Massachusetts Institute of Technology - Sloan School of Management

K. Ramesh

Rice University

Date Written: February 1, 2013

Abstract

We documented that announcements of a delay in the reporting of earnings produce an average one-day abnormal stock return of approximately -6%, with delays precipitated by accounting issues or lacking an explanation resulting in more negative market reactions than delays relating to business events, implementation of new accounting standards, or non-business reasons such as bad weather. Our market reaction findings continued to hold after we controlled for contemporaneous management guidance, timing of the delay announcement, materiality of any accounting issues, and richness of the information environment. Lastly, we showed that the market reaction to earnings delay announcements is consistent with these disclosures signaling deteriorating financial performance.

Suggested Citation

Duarte-Silva, Tiago and Fu, Huijing and Noe, Christopher F. and Ramesh, K., How Do Investors Interpret Announcements of Earnings Delays? (February 1, 2013). Journal of Applied Corporate Finance, Winter 2013. Available at SSRN: https://ssrn.com/abstract=2250027

Tiago Duarte-Silva (Contact Author)

Charles River Associates (CRA) ( email )

200 Clarendon Street, T-31
Boston, MA 02116
United States
+1-617-425-3128 (Phone)

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Huijing Fu

Texas Christian University ( email )

Fort Worth, TX 76129
United States
817-257-7148 (Phone)
817-257-7227 (Fax)

Christopher F. Noe

Massachusetts Institute of Technology - Sloan School of Management ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States

K. Ramesh

Rice University ( email )

236 McNair Hall
Jones Graduate School of Business
Houston, TX 77005
United States
713.348.5380 (Phone)
713.348.6296 (Fax)

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