Earnings Announcements and Market Depth

Posted: 11 Sep 1996

See all articles by Robert M. Bushman

Robert M. Bushman

University of North Carolina Kenan-Flagler Business School

Sunil Dutta

University of California, Berkeley - Haas School of Business

Multiple version iconThere are 2 versions of this paper

Abstract

This paper investigates how strategic trading around the time of earnings announcements affects market liquidity (e.g., bid-ask spreads). We model an investor with private information in advance of an earnings announcement (e.g., inside information). The investor trades both before and after the earnings announcement in a market populated by liquidity-motivated traders who have some discretion over the time of their trades. The main result of the analysis is that an earnings announcement which reduces and insider's private information may lead to a less liquid market in the post-announcement period.

JEL Classification: M41, G12

Suggested Citation

Bushman, Robert M. and Dutta, Sunil, Earnings Announcements and Market Depth. CONTEMPORARY ACCOUNTING RESEARCH, Vol 14, No 1, Spring 1997. Available at SSRN: https://ssrn.com/abstract=2745

Robert M. Bushman (Contact Author)

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

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-9809 (Phone)

HOME PAGE: http://public.kenan-flagler.unc.edu/faculty/bushmanr/

Sunil Dutta

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-643-1229 (Phone)
510-643-1412 (Fax)

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