Publication Type

Journal Article

Version

Preprint

Publication Date

5-2011

Abstract

In a competitive information market, a single information source can only dominate other sources individually, not collectively. We explore whether earnings announcements constitute such a dominant source using Ball and Shivakumar's (2008) [How much new information is there in earnings?, Journal of Accounting Research, 2008, 46(5), pp. 975–1016] R 2 metric: the proportion of the variation in annual returns explained by the four quarterly earnings announcement returns. We find that the earnings announcement days' R 2 is 11% – higher than the corresponding R 2 of days with dividend announcements, management forecasts, preannouncements, and 10-K and 10-Q filings and their amendments, and comparable to that of the four days with the largest realised absolute returns in a year. Additional analysis reveals that earnings announcements convey extreme bad news as often as management forecasts and preannouncements; for any other type of news, earnings announcements are much more frequent. We conclude that earnings announcements are an important source of new information in the equity market.

Keywords

earnings information arrival days, conditional information content, information monopoly

Discipline

Corporate Finance | Portfolio and Security Analysis

Research Areas

Finance

Publication

European Accounting Review

Volume

22

Issue

2

First Page

221

Last Page

256

ISSN

0963-8180

Identifier

10.1080/09638180.2013.782820

Publisher

Taylor and Francis

Additional URL

http://dx.doi.org/10.1080/09638180.2013.782820

Comments

Received revise-and-resubmit decision at the European Accounting Review

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