Are Investors Influenced by the Order of Information in Earnings Press Releases?

44 Pages Posted: 12 Sep 2017  

Lin Cheng

The University of Arizona - Eller College of Management

Darren T. Roulstone

Ohio State University (OSU) - Fisher College of Business

Andrew Van Buskirk

Ohio State University (OSU) - Department of Accounting & Management Information Systems

Date Written: September 1, 2017

Abstract

We examine the ordering of information within quarterly earnings announcements, and how that ordering influences investor response to those announcements. We find that managers appear to emphasize good news; on average, positive information is concentrated in the first section of the press release, rather than evenly dispersed. This emphasis does not appear to be driven by managerial incentives to manage perceptions. Instead, it appears to be informative: positive information is emphasized more when the expectations gap between the market and managers is positive (i.e., when the market is unduly pessimistic about future earnings). Investors respond to emphasized news – earnings-period returns increase with our measure of emphasis even after controlling for the earnings surprise and the aggregate news in the overall document – although that response is incomplete. Our collective evidence suggests that information placement conveys useful information to the market, and that investor response to information placement is warranted, rather than the result of an unintentional cognitive effect.

Keywords: earnings release, disclosure, order of information, underreaction

JEL Classification: G14, G41, M40

Suggested Citation

Cheng, Lin and Roulstone, Darren T. and Van Buskirk, Andrew, Are Investors Influenced by the Order of Information in Earnings Press Releases? (September 1, 2017). Available at SSRN: https://ssrn.com/abstract=3034761 or http://dx.doi.org/10.2139/ssrn.3034761

Lin Cheng (Contact Author)

The University of Arizona - Eller College of Management ( email )

McClelland Hall, Room 301Q
1130 E. Helen Street
Tucson, AZ 85721
United States

Darren T. Roulstone

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Andrew Van Buskirk

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

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