The Information Content of Sec Filings and Information Environment: A Variance Decomposition Analysis

Posted: 26 Mar 2006

See all articles by Jeffrey L. Callen

Jeffrey L. Callen

University of Toronto - Rotman School of Management

Joshua Livnat

New York University; Prudential Financial - Quantitative Management Associates

Dan Segal

Interdisciplinary Center (IDC) Herzliyah

Abstract

Using the Vuolteenaho (2002) variance decomposition methodology, this study assesses the relative value relevance of cash flow, accrual (earnings) and expected return news on SEC and preliminary earnings filing dates, as measured by their contribution to the volatility of unexpected returns. Cash flow news is found to be more value relevant than accrual news. Although expected return (risk) news is the least value relevant, it is significantly correlated with changes in betas and returns at the preliminary and SEC filing dates, indicating association with changes in firm risk and discount rates. This study also documents that these informational components contain less (more) value relevant information at the SEC filing date for firms with a higher proportion of long-term (transient momentum) sophisticated investors after controlling for other dimensions of the information environment.

Keywords: SEC Filings, Value Relevance, Variance Decomposition

JEL Classification: G12, M41, M43, G38

Suggested Citation

Callen, Jeffrey L. and Livnat, Joshua and Segal, Dan, The Information Content of Sec Filings and Information Environment: A Variance Decomposition Analysis. Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=892031

Jeffrey L. Callen

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-5641 (Phone)
416-971-3048 (Fax)

Joshua Livnat (Contact Author)

New York University ( email )

44 West 4th Street, Suite 10-76
Stern School of Business
New York, NY 10012-1118
United States
212-998-0022 (Phone)
212-995-4004 (Fax)

Prudential Financial - Quantitative Management Associates ( email )

2 Gateway Center
6th Fl.
Newark, NJ 07102
United States

Dan Segal

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

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