Nonfinancial 8-K disclosures and individual investors' trading during earnings announcement window

Jinglin Jiang and Weiwei Wang

International Journal of Managerial Finance, 2024, vol. 21, issue 1, 218-249

Abstract: Purpose - This study investigates the influence of nonfinancial 8-K disclosures released during the earnings announcement window on the abnormal trading activities of individual investors. Design/methodology/approach - We employ regression analysis in this empirical study to examine the impact of nonfinancial 8-K filings on individual investors' abnormal trading activities. Findings - Our results reveal that individual investors exhibit higher levels of abnormal trading activities when firms release nonfinancial 8-Ks during the (0,1) window of earnings announcements. This effect is observed for both buyer-initiated and seller-initiated transactions and is particularly pronounced for firms reporting an operating loss. Negative sentiment in 8-Ks significantly intensifies such effect. Additionally, we find that buy-sell consensus increases significantly with concurrent nonfinancial 8-Ks. This suggests that 8-Ks may reduce information noise, leading individuals to trade with greater conviction. Originality/value - Our study examines the joint influence of nonfinancial 8-Ks and earnings announcements on individual investors' trading activities, thereby providing a novel perspective on the mechanisms through which 8-K filings affect individual investors' trading behaviors.

Keywords: Accounting disclosure; Market microstructure; Individual investors' trading; G14; G31; M41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-07-2023-0341

DOI: 10.1108/IJMF-07-2023-0341

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