Firm Complexity and Post-Earnings-Announcement Drift

Review of Accounting Studies (2022)

62 Pages Posted: 21 Nov 2019 Last revised: 27 Oct 2022

See all articles by Alexander Barinov

Alexander Barinov

University of California Riverside

S. Saeyeul Park

Yonsei University

Çelim Yıldızhan

Koç University

Date Written: March 11, 2022


We show that the post earnings announcement drift (PEAD) is stronger for conglomerates than single-segment firms. Conglomerates, on average, are larger than single segment firms, so it is unlikely that limits-to-arbitrage drive the difference in PEAD. Rather, we hypothesize that market participants find it more costly and difficult to understand firm-specific earnings information regarding conglomerates as they have more complicated business models than single-segment firms. This in turn slows information processing about them. In support of our hypothesis, we find that, compared to single-segment firms with similar firm characteristics, conglomerates have relatively low institutional ownership and short interest, are covered by fewer analysts, these analysts have less industry expertise and make larger forecast errors. Finally, we find that an increase in organizational complexity leads to larger PEAD and document that more complicated conglomerates have even greater PEAD. Our results are robust to a long list of alternative explanations of PEAD as well as alternative measures of firm complexity.

Keywords: organizational complexity, post-earnings-announcement drift, conglomerates, complicated firms

JEL Classification: G11, G12, G14, G32, G33, M4, L14, D82

Suggested Citation

Barinov, Alexander and Park, S. Saeyeul and Yıldızhan, Çelim, Firm Complexity and Post-Earnings-Announcement Drift (March 11, 2022). Review of Accounting Studies (2022), Available at SSRN: or

Alexander Barinov

University of California Riverside ( email )

900 University Ave.
Anderson Hall
Riverside, CA 92521
United States
585-698-7726 (Phone)


S. Saeyeul Park

Yonsei University ( email )

Korea, Republic of (South Korea)

Çelim Yıldızhan (Contact Author)

Koç University ( email )

College of Administrative Sciences and Economics
Rumeli Feneri Yolu, Sariyer
Istanbul, 34450

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