Regulatory Enforcement, Management Earnings Forecasts, and Benchmarks of Earnings Announcement News in a Continuous Disclosure Environment

28 Pages Posted: 16 Nov 2022

See all articles by Larelle Law Chapple

Larelle Law Chapple

QUT School of Business; Financial Research Network (FIRN)

Lien Duong

Curtin University of Technology; Curtin University

Thu Phuong Truong

Victoria University of Wellington - Te Herenga Waka

Abstract

We examine the contemporaneous and delayed market reaction to earnings announcements in a market setting characterised by strong disclosure regulation and enforcement. We evaluate the information content of four benchmarks of earnings announcement news: earnings in the previous year, analysts’ forecast consensus, tail analysts’ forecast errors, and earnings news derived from the contemporaneous market reaction to earnings announcements. By setting the study in the continuous disclosure environment of Australia, we extend the literature by investigating the impact of enforcement actions triggered by the market operators and firms’ decision to update the market with standalone earnings forecasts. We document that these four benchmarks significantly improve the profitability of post-earnings announcement drift strategies and the significance of these four benchmarks varies across firms subject to regulatory action and standalone earnings forecasting firms. Our study provides important regulatory and practical implications supporting intervention by market operators.

Keywords: continuous disclosure, price query, management earnings forecasts, earnings announcements, event study

Suggested Citation

Law Chapple, Larelle and Duong, Lien and Duong, Lien and Truong, Thu Phuong, Regulatory Enforcement, Management Earnings Forecasts, and Benchmarks of Earnings Announcement News in a Continuous Disclosure Environment. Available at SSRN: https://ssrn.com/abstract=4278294 or http://dx.doi.org/10.2139/ssrn.4278294

Larelle Law Chapple

QUT School of Business ( email )

GPO Box 2434
Brisbane, Queensland 4001
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Lien Duong

Curtin University of Technology ( email )

School of Accounting, Curtin Business School
GPO Box U1987
Perth, WA 6845
Australia
(618) 9266 1212 (Phone)
(618) 9266 7196 (Fax)

Curtin University ( email )

Kent Street
Bentley
Perth, WA WA 6102
Australia

Thu Phuong Truong (Contact Author)

Victoria University of Wellington - Te Herenga Waka ( email )

P.O. Box 600
Wellington, 6140
New Zealand
64 4 463 5233 (ext 8961) (Phone)
64 4 463 5076 (Fax)

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