Increased market response to earnings announcements in the 21st century: An Empirical Investigation

William H. Beaver, Maureen F. McNichols and Zach Z. Wang

Journal of Accounting and Economics, 2020, vol. 69, issue 1

Abstract: We examine the role of concurrent information in the striking increase in investor response to earnings announcements from 2001 to 2016, as measured by return variability and volume following Beaver (1968). We find management guidance, analyst forecasts, and disaggregated financial statement line items are more frequently bundled with earnings announcements, and each of these items explains part of the increase in market response. Furthermore, collectively, these concurrent information releases explain a substantial fraction of the increase in market response to earnings announcements since 2001. This is in contrast to the decline in market response to management guidance issued separately from earnings and the much smaller increase in market response to analyst forecasts issued separately from earnings over this time. The findings indicate that information arrival at earnings announcement dates has increased significantly over the past two decades, and that key components of this are increased disclosures by management of guidance and financial statement line items and forecasts by analysts.

Keywords: Capital markets; Earnings announcements; Financial statements; Return volatility; Management guidance; Analyst forecasts (search for similar items in EconPapers)
JEL-codes: G12 G14 G29 M40 M41 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:69:y:2020:i:1:s0165410119300394

DOI: 10.1016/j.jacceco.2019.101244

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