Cross-quarter differential market reactions: An investigation of the audit effect hypothesis

Publication Type

Journal Article

Publication Date

4-2016

Abstract

The purpose of this paper is to investigate the audit effect hypothesis for the cross quarter differential market reactions to earnings announcements. Earnings response coefficients are focused upon as indicators of perceived earnings quality. The evidence suggests that investors of Singapore-listed companies respond more strongly to earnings announcements in the fourth quarter than other interim quarters. Finds support the notion that investors attach different degrees of reliability to interim quarter earnings relative to final quarter earnings. Findings in this study shed new light on the audit effect hypothesis and are relevant to accounting regulators and audit committee members seeking to enhance credibility of earnings announcements.

Keywords

Earnings quality, Audit effect, Earnings response coefficient

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

Pacific Accounting Review

Volume

28

Issue

2

First Page

219

Last Page

235

ISSN

0114-0582

Identifier

10.1108/PAR-07-2015-0030

Publisher

Emerald

Embargo Period

9-21-2016

Additional URL

http://dx.doi.org/10.1108/PAR-07-2015-0030

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