Increased Market Response to Earnings Announcements in the 21st Century: An Empirical Investigation

77 Pages Posted: 17 Nov 2017 Last revised: 24 Mar 2020

Date Written: July 19, 2019

Abstract

We examine the role of concurrent information in the striking increase in investor response to earnings announcements from 2001 to 2016, as measured by return variability and volume following Beaver (1968). We find management guidance, analyst forecasts, and disaggregated financial statement line items are more frequently bundled with earnings announcements, and each of these items explains part of the increase in market response. Furthermore, collectively, these concurrent information releases explain a substantial fraction of the increase in market response to earnings announcements since 2001. This is in contrast to the decline in market response to management guidance issued separately from earnings and the much smaller increase in market response to analyst forecasts issued separately from earnings over this time. The findings indicate that information arrival at earnings announcement dates has increased significantly over the past two decades, and that key components of this are increased disclosures by management and forecasts by analysts.

Keywords: capital markets, earnings announcements, information content, financial statements, management guidance, analyst forecasts

JEL Classification: G12, G14, G29, M40, M41

Suggested Citation

Beaver, William H. and McNichols, Maureen F. and Wang, Zach, Increased Market Response to Earnings Announcements in the 21st Century: An Empirical Investigation (July 19, 2019). Journal of Accounting & Economics (JAE), 2020, Volume 69, Article 101244, Stanford University Graduate School of Business Research Paper No. 17-69, Available at SSRN: https://ssrn.com/abstract=3071317 or http://dx.doi.org/10.2139/ssrn.3071317

William H. Beaver

Stanford University ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-4409 (Phone)
650-725-6152 (Fax)

Maureen F. McNichols (Contact Author)

Stanford University ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-0833 (Phone)

Zach Wang

Cornerstone Research ( email )

1000 El Camino Real
Menlo Park, CA 94025-4327
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
415
Abstract Views
2,323
rank
79,449
PlumX Metrics