What Do Measures of Real-Time Corporate Sales Tell Us About Earnings Surprises and Post-Announcement Returns?

52 Pages Posted: 1 Sep 2016

See all articles by Kenneth Froot

Kenneth Froot

National Bureau of Economic Research (NBER); Harvard University - Business School (HBS)

Namho Kang

Bentley University - Department of Finance

Gideon Ozik

EDHEC Business School

Ronnie Sadka

Boston College - Carroll School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: August 29, 2016

Abstract

We develop real-time proxies of retail corporate sales from multiple sources, including ~50 million mobile devices. These measures contain information from both the earnings quarter (“within quarter”) and the period between that quarter’s end and the earnings announcement date (“post quarter”). Our within-quarter measure is powerful in explaining quarterly sales growth, revenue surprises and earnings surprises, generating average excess announcement returns of 3.4%. However, surprisingly, our post-quarter measure is related negatively to announcement returns, and positively to post-announcement returns. When post-quarter private information is positive, managers, at announcement, provide pessimistic guidance and use negative language. This effect is more pronounced when, post-announcement, management insiders trade. We conclude managers do not fully disclose their private information and instead bias their disclosures down when in possession of positive private information. The data suggest they may be motivated in part by subsequent personal stock-trading opportunities.

Keywords: Earnings Announcement, Insider Trading, Private Information

Suggested Citation

Froot, Kenneth and Kang, Namho and Ozik, Gideon and Sadka, Ronnie, What Do Measures of Real-Time Corporate Sales Tell Us About Earnings Surprises and Post-Announcement Returns? (August 29, 2016). Available at SSRN: https://ssrn.com/abstract=2832189 or http://dx.doi.org/10.2139/ssrn.2832189

Kenneth Froot

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Namho Kang (Contact Author)

Bentley University - Department of Finance ( email )

175 Forest Street
Waltham, MA 02154
United States

Gideon Ozik

EDHEC Business School ( email )

Nice
France

Ronnie Sadka

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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