Public Predisclosure Information, Firm Size, Analyst Following, and Market Reactions to Earnings Announcements

34 Pages Posted: 23 Sep 2004

See all articles by Theodore E. Christensen

Theodore E. Christensen

University of Georgia - J.M. Tull School of Accounting; University of Georgia

Toni Q. Smith

University of New Hampshire - Department of Accounting & Finance

Pamela S. Stuerke

University of Rhode Island - College of Business

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Abstract

This study examines the effects of public predisclosure information on market reactions to earnings announcements. We develop an empirical measure of public pre-disclosure information impounded in price prior to earnings announcements by cumulating abnormal returns on public news release dates during the quarter. Consistent with prior literature, we document a negative association between this measure and market reactions to subsequent earnings announcements. Moreover, we find that after controlling for this measure, firm size and analyst following are significantly positively associated with market reactions to earnings announcements. Contrary to prior empirical evidence, our results suggest that, after controlling for actual predisclosure information impounded in price, market reactions to earnings announcements are greater in magnitude for larger, more widely-followed firms than for smaller, less widely-followed firms.

JEL Classification: G12, G29, M41

Suggested Citation

Christensen, Theodore E. and Smith, Toni Q. and Stuerke, Pamela S., Public Predisclosure Information, Firm Size, Analyst Following, and Market Reactions to Earnings Announcements. Available at SSRN: https://ssrn.com/abstract=591495

Theodore E. Christensen (Contact Author)

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States

University of Georgia ( email )

Athens, GA
United States

Toni Q. Smith

University of New Hampshire - Department of Accounting & Finance ( email )

Durham, NH 03824
United States

Pamela S. Stuerke

University of Rhode Island - College of Business ( email )

Kingston, RI 02881
United States

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