The Inferential Value of Quarterly Earnings Announcements Relative to Other Sources of Information

41 Pages Posted: 22 Dec 2006 Last revised: 6 Apr 2011

See all articles by C. Catherine Chiang

C. Catherine Chiang

Elon University

Yaw M. Mensah

Rutgers Business School - Newark & New Brunswick

Date Written: December 1, 2006

Abstract

This paper evaluates the prevalent view that accounting information competes with, but also disciplines, information from other sources by examining the inferential value to investors of accounting versus non-accounting information. Inferential value is defined as the ability of the capital markets to draw the correct inference from the information signals regarding future firm performance. Both average quarterly accounting rate of return on equity and excess stock returns are used as measures of firm performance. The findings indicate that a market-normalized accounting rate of return derived from stock prices and excess returns measured around earnings announcement dates are more highly correlated with changes in future firm performance than similar measures in the non-disclosure periods. The findings support the prevalent view that accounting information disciplines information from other sources.

Keywords: Inferential value, Investor information sources, Investor reaction, Quarterly Earnings

JEL Classification: M41

Suggested Citation

Chiang, C. Catherine and Mensah, Yaw M., The Inferential Value of Quarterly Earnings Announcements Relative to Other Sources of Information (December 1, 2006). Available at SSRN: https://ssrn.com/abstract=953255 or http://dx.doi.org/10.2139/ssrn.953255

C. Catherine Chiang

Elon University ( email )

Elon, NC 27244
United States

Yaw M. Mensah (Contact Author)

Rutgers Business School - Newark & New Brunswick ( email )

100 Rockafeller Road
Piscataway, NJ 08854
United States
848.445.4369 (Phone)
732.445.0351 (Fax)

HOME PAGE: http://business.rutgers.edu

Register to save articles to
your library

Register

Paper statistics

Downloads
114
Abstract Views
918
rank
244,150
PlumX Metrics