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Strategic Release of Information on Friday: Evidence from Earnings Announcements

49 Pages Posted: 8 Sep 2004  

Stefano DellaVigna

University of California, Berkeley; National Bureau of Economic Research (NBER)

Joshua Matthew Pollet

University of Illinois at Urbana-Champaign - Department of Finance

Date Written: January 15, 2005

Abstract

Do firms time the release of news in response to investor inattention? We consider news about earnings and analyze the reaction of investors to announcements on Friday and on other weekdays. The day of the week for the announcement has two main effects on stock returns. First, the short-term response to Friday earnings announcements is 20 percent smaller than the response on other days of the week. Second, the post-earnings drift is 70 percent larger for Friday announcements. These stylized facts suggest that weekends distract investor attention temporarily. Consistent with this interpretation, trading volume around announcement day increases 20 percent less for Friday than for non-Friday announcements. The empirical evidence supports models of post-earning announcement drift based on underreaction to information due to cognitive constraints. We also show that firms appear to respond to investor distraction by releasing worse announcements on Friday. Friday releases are associated with a 25 percent higher probability of a negative earnings surprise and a 50 basis points lower abnormal stock return. Finally, we document a similar pattern of strategic behavior for political decisions. The US President is 25 percent less likely to sign executive orders or legislation containing good news on Friday.

Keywords: Earnings announcements, Friday, attention

JEL Classification: G12, M41, M45

Suggested Citation

DellaVigna, Stefano and Pollet, Joshua Matthew, Strategic Release of Information on Friday: Evidence from Earnings Announcements (January 15, 2005). Available at SSRN: https://ssrn.com/abstract=586702 or http://dx.doi.org/10.2139/ssrn.586702

Stefano DellaVigna (Contact Author)

University of California, Berkeley ( email )

Economics Department
549 Evans Hall #3880
Berkeley, CA 94720
United States
510-643-0715 (Phone)
510-642-6615 (Fax)

HOME PAGE: http://emlab.berkeley.edu/users/sdellavi/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joshua Matthew Pollet

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States
(217) 344-4311 (Phone)

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