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
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: Suggested Citation