Share Price Reaction to Earnings Announcement on the JSE-ALtX: A Test for Market Efficiency

Southern African Business Review, Volume 15, Number 3, 2011

25 Pages Posted: 27 Mar 2017

See all articles by V. Mlonzi

V. Mlonzi

University of South Africa (UNISA) - Graduate School of Business Leadership (SBL)

Jan Walters Kruger

University of South Africa (UNISA) - Graduate School of Business Leadership (SBL)

Meiya G. Nthoesane

University of South Africa-Centre for Business Management

Date Written: 2011

Abstract

Management has a duty to inform both shareholders and investors about the state of health of a firm. Earnings announcements provide a yardstick that can be utilised by the market to assess the wealth and profitability of a firm. The purpose of the study was to investigate whether there are any significant abnormal returns around the public announcement of earnings and to establish whether the efficient capital market hypothesis applies to the small ALtX market.

The study focused on all the companies listed on the JSE-ALtX that announced annual earnings between 1 January and 31 December 2009. The method used for calculating the expected returns was the Capital Asset Pricing Model (CAPM).

Empirical evidence demonstrates that there is substantial negative share price reaction to earnings announcements on the small ALtX stock market. The ALtX also shows the weak form of market efficiency. The study concluded that during a recessionary period, shareholders’ wealth is eroded in the small ALtX market; however, the weak form of market efficiency provides an opportunity for entrepreneurs and investors to exploit the market for profits when the market is performing well.

Keywords: Efficient Market Hypothesis, Earnings Announcement, Capital Asset Pricing

Suggested Citation

Mlonzi, V. and Kruger, Jan Walters and Nthoesane, Meiya Gert, Share Price Reaction to Earnings Announcement on the JSE-ALtX: A Test for Market Efficiency (2011). Southern African Business Review, Volume 15, Number 3, 2011, Available at SSRN: https://ssrn.com/abstract=2940582

V. Mlonzi

University of South Africa (UNISA) - Graduate School of Business Leadership (SBL)

Smutsweg
Midrand, 1686
South Africa

Jan Walters Kruger

University of South Africa (UNISA) - Graduate School of Business Leadership (SBL) ( email )

Smutsweg
Midrand, 1686
South Africa

HOME PAGE: http://za.linkedin.com/pub/prof-jan-kruger/10/368/677/

Meiya Gert Nthoesane (Contact Author)

University of South Africa-Centre for Business Management ( email )

P.O. Box 392
UNISA
Pretoria, Gauteng 0003
South Africa
+27 12 352 4151 (Phone)

HOME PAGE: http://www.unisa.ac.za/cbm

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
122
Abstract Views
1,510
Rank
414,524
PlumX Metrics