TY - JOUR
T1 - The information content of earnings announcements
T2 - New insights from intertemporal and cross-sectional behavior
AU - Beaver, William H.
AU - McNichols, Maureen F.
AU - Wang, Zach Z.
N1 - Publisher Copyright:
© 2017, Springer Science+Business Media, LLC.
Copyright:
Copyright 2018 Elsevier B.V., All rights reserved.
PY - 2018/3/1
Y1 - 2018/3/1
N2 - This study examines the information content of quarterly earnings announcements, measured as the magnitude of stock price revision at earnings announcements relative to price revision at other times. We investigate whether quarterly earnings announcements are informative using a nonparametric approach and 1971–2011 sample period. The findings affirm prior evidence on earlier sample periods that significantly more information is conveyed to investors in the three days around earnings announcements than in randomly chosen three-day periods. Next, we examine the behavior of information content over our sample period and document four key findings. First, there is a dramatic increase in information content at earnings dates from 2001 onward. Second, the market reaction to loss firms is substantially less than that for profitable firms. Third, there is a significantly greater reaction to larger firms. Fourth, reaction at earnings dates is significantly increasing in analyst coverage, and once analyst coverage is controlled, the association with size becomes less significant.
AB - This study examines the information content of quarterly earnings announcements, measured as the magnitude of stock price revision at earnings announcements relative to price revision at other times. We investigate whether quarterly earnings announcements are informative using a nonparametric approach and 1971–2011 sample period. The findings affirm prior evidence on earlier sample periods that significantly more information is conveyed to investors in the three days around earnings announcements than in randomly chosen three-day periods. Next, we examine the behavior of information content over our sample period and document four key findings. First, there is a dramatic increase in information content at earnings dates from 2001 onward. Second, the market reaction to loss firms is substantially less than that for profitable firms. Third, there is a significantly greater reaction to larger firms. Fourth, reaction at earnings dates is significantly increasing in analyst coverage, and once analyst coverage is controlled, the association with size becomes less significant.
KW - Capital markets
KW - Earnings announcements
KW - Information content
KW - Return volatility
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U2 - 10.1007/s11142-017-9417-z
DO - 10.1007/s11142-017-9417-z
M3 - Article
VL - 23
SP - 95
EP - 135
JO - Review of Accounting Studies
JF - Review of Accounting Studies
SN - 1380-6653
IS - 1
ER -