The Differential Market Reaction to Pre-Open versus Post-Close Earnings Announcements

Abstract

The vast majority of U.S. public firms announce earnings in the post-close (between the closing bell and midnight) or the pre-open (between midnight and the opening bell). Prior research provides conflicting evidence as to whether the market reaction to earnings announcements differs depending on the time of day of the announcement. We provide direct evidence on whether there is a differential market reaction to earnings announcements released in the pre-open versus the post-close by using high frequency intra-day data. We find that pre-open announcements experience a lower earnings response coefficient, lower volatility, and lower trading volume in the 24 hours immediately following the announcement and greater post-earnings announcement drift in the days after the announcement. Despite finding no evidence that announcing in the PO or PC is strategic based on the earnings news, we find that the market incorporates earnings news more slowly after pre-open announcements than post-close announcements.

Keywords: Earnings Response Coefficient, Volatility, Earnings Announcements, Disclosure Timing

JEL Classification: G12, G14, G17