Does Financial Statement Comparability Mitigate Delayed Trading Volume Before Earnings Announcements?

44 Pages Posted: 26 Sep 2019

See all articles by Junwoo Kim

Junwoo Kim

University of Massachusetts Boston

Robert Kim

University of Massachusetts Boston

Sangwan Kim

University of Massachusetts Boston

Date Written: September 14, 2019

Abstract

This paper examines the role of financial statement comparability in shaping trading volume prior to earnings announcements. We find that the degree of delayed trading volume prior to earnings announcements is less pronounced for firms with more comparable financial statements. In addition, the effect of financial statement comparability on pre-announcement trading volume is stronger in more opaque information environments. Our findings are incrementally significant after controlling for a comprehensive set of within-firm earnings attributes and robust to various research design choices including alternative comparability models with differing peer group selection. Collectively, our results show that financial statement comparability serves an integral mechanism facilitating a firm’s pre-existing information environment. In sum, this paper constitutes the first, volume-based evidence which lends support to the usefulness of financial statement comparability in investors’ trading activity.

Keywords: financial statement comparability; trading volume; earnings announcements; information environment; information asymmetry

JEL Classification: G14, M41

Suggested Citation

Kim, Junwoo and Kim, Robert and Kim, Sangwan, Does Financial Statement Comparability Mitigate Delayed Trading Volume Before Earnings Announcements? (September 14, 2019). Journal of Business Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3453577

Junwoo Kim

University of Massachusetts Boston ( email )

100 William T Morrissey Blvd
Boston, MA 02125
United States

Robert Kim (Contact Author)

University of Massachusetts Boston ( email )

100 Morrissey Blvd.
College of Management
Boston, MA 02125
United States

HOME PAGE: http://ssrn.com/author=1376774

Sangwan Kim

University of Massachusetts Boston ( email )

100 Morrissey Blvd.
Boston, MA 02125
United States

HOME PAGE: http://https://www.umb.edu/faculty_staff/bio/sangwan_kim

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