Do Profit Warnings Convey Information About the Industry?

Dave Jackson, Jeff Madura and Judith Swisher
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Dave Jackson: Department of Finance, College of Business, University of Texas–Pan American, 1201 West University Drive, Edinburg, Texas 78541-2999, USA
Jeff Madura: Department of Finance and Real Estate, Florida Atlantic University, 220 SE 2nd ave., Fort Lauderdale, FL 33431, USA
Judith Swisher: Department of Finance and Commercial Law, Haworth College of Business, Western Michigan University, 49008 5420, USA

Chapter 5 in Advances in Quantitative Analysis of Finance and Accounting, 2007, pp 85-111 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractWe find that profit warnings result in negative industry effects, which indicate that profit warnings convey negative industry information rather than favorable information for industry rivals about the competition. Multivariate analyses show that profit warnings carry stronger industry signals when the warning firm has a greater stock price adjustment, are larger, and have more analyst coverage. The adverse industry effects in response to profit warnings are attenuated since the inception of Regulation Fair Disclosure (RFD). However, the sensitivity of industry effects to the warning firm's stock price adjustment and size has increased since RFD. Adverse industry effects are also attenuated when market sentiment is more favorable.

Keywords: Monte Carlo Simulations; REIT; IPO; Fractional Integration; Seasonality; Long Memory; Macroeconomic Shocks; VAR; Interest Rates (search for similar items in EconPapers)
Date: 2007
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