Use of Different Trading Environments Around Interim Earnings Announcements on the Helsinki Stock Exchange

Abstract

This paper tests the hypothesis that an anticipated information event (e.g. interim earnings announcement) affects the use of trading venues. Data from the Helsinki Stock Exchange are used where an upstairs market co-exists with an anonymous downstairs market. Trades are classified also as in-house trades and externalised trades. In this study, evidence is found that before the announcement event, the proportion of cross-broker trading in the downstairs market increases compared with trading in this mode during a non-announcement period. Correspondingly in-house trades in the upstairs market tend to decrease before the announcement. After the announcement upstairs trading recovers. Furthermore, the empirical findings show that the use of cross-broker trades in the downstairs market is negatively related to the trading activity and intraday price volatility during the pre-announcement period. After the announcement especially the volatility association changes resulting in increased downstairs trading with high volatility.

Keywords: event study, information asymmetry, accounting disclosure, thin securities markets, trading behavior, trading execution mechanism

JEL Classification: D23, D82, G18