Under the Microscope: Trade Initiation Activities Around Earnings and Takeover Announcements in a Market with Continuous Disclosure

43 Pages Posted: 18 Feb 2021

See all articles by Priyantha Mudalige

Priyantha Mudalige

Curtin University- School of Economics, Finance and property

Petko S. Kalev

RoZetta Institute; La Trobe Business School

Kartick Gupta

University of South Australia

Date Written: January 27, 2021

Abstract

This paper examines whether release time of earnings and take over announcements influences trade initiation motives. We find that investors’ initiate buy and sell (buy or sell) trades immediately before (after) earnings and takeover day announcements. Volatility is high and effective spread is prominent before overnight announcements. This result suggests active informed trading and potential information leakage. Similarly, high volatility and less prominent effective spread before day announcements imply active uninformed trading. Private information (Differential information) is the likely motive for trade initiation before overnight announcements (day announcements). These results show that release time of firm-specific announcements matter in terms of influencing trade initiation motives and market dynamic variables. Our results suggests that day announcements are more effective in controlling information leakage than overnight announcements and complements prior literature on effectiveness of continuous disclosure on the ASX.

Keywords: Overnight Announcements; Day Announcements; Trade Initiation; Information Asymmetry; Differential Information; Informed Trading, Continuous Disclosure

JEL Classification: G11, G12, G14

Suggested Citation

Mudalige, Priyantha and Kalev, Petko S. and Gupta, Kartick, Under the Microscope: Trade Initiation Activities Around Earnings and Takeover Announcements in a Market with Continuous Disclosure (January 27, 2021). Available at SSRN: https://ssrn.com/abstract=3773960 or http://dx.doi.org/10.2139/ssrn.3773960

Priyantha Mudalige (Contact Author)

Curtin University- School of Economics, Finance and property ( email )

Building, 408 Room 3035
Kent St.
Bentley, WA 6102
Australia
61892669977 (Phone)

Petko S. Kalev

RoZetta Institute ( email )

Sydney

La Trobe Business School ( email )

Department of Economics and Finance
Donald Whitehead Building: Level 3, DWB313
Bundoora, Victoria 3086
Australia
+613 9479 6285 (Phone)
+613 9479 1654 (Fax)

HOME PAGE: http://www.latrobe.edu.au/business/about/staff/profile?uname=PKalev

Kartick Gupta

University of South Australia ( email )

37-44 North Terrace, City West Campus
Adelaide, South Australia 5001
Australia
+61 8 830 27179 (Phone)

HOME PAGE: http://people.unisa.edu.au/Kartick.Gupta

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
36
Abstract Views
278
PlumX Metrics