Competitive earnings news and post-earnings announcement drift

H. Kent Baker, Yang Ni, Samir Saadi and Hui Zhu

International Review of Financial Analysis, 2019, vol. 63, issue C, 331-343

Abstract: Using a large sample covering the period 1996–2015, we find a positive relation between the return of the announced firm on the date of peer firms' announcements and industry-wide earnings news of peer firms. Our results imply that same-industry-peer earnings announcements play a role in the analyst forecast-based drift, and are consistent with the notion of intra-industry information transfers. Additional analyses show that economic conditions and the relative size of the rival firms can affect the nature and magnitude of the link between announced firm's return surrounding the date of the rival firm's announcements and the rival firms' industry-wide component of earnings surprises. We also document evidence that is more consistent with analyst forecast-based drift reflecting investors exhibiting limited attention behavior as opposed to investors' conservatism bias. Our results are robust across different estimations and clustering procedures.

Keywords: Post-earnings announcement drift; Industry-wide earnings news; Subsequent earnings announcements (search for similar items in EconPapers)
JEL-codes: G10 G14 M41 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:63:y:2019:i:c:p:331-343

DOI: 10.1016/j.irfa.2017.02.002

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