Market Reaction to Multiple Contemporaneous Earnings Signals: Earnings Announcements and Future Earnings Guidance

Rowland K. Atiase (), Haidan Li, Somchai Supattarakul and Senyo Tse
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Rowland K. Atiase: The University of Texas at Austin
Haidan Li: University of Iowa
Somchai Supattarakul: Thammasat University
Senyo Tse: Texas A&M University

Review of Accounting Studies, 2005, vol. 10, issue 4, No 5, 497-525

Abstract: Abstract We examine market reactions to contemporaneous announcements of current earnings and future earnings guidance for evidence on how investors trade off relevance and reliability. Current earnings are more reliable than future earnings guidance, but future earnings guidance may be more relevant for predicting future performance. We find that current earnings are more strongly associated with announcement-period returns than concurrently disclosed future earnings guidance, consistent with investors’ relative preference for reliability. We find similar return reactions to stand-alone earnings and to earnings released with guidance. In contrast, return reactions are lower for guidance announced simultaneously with current earnings than for stand-alone guidance.

Keywords: multiple contemporaneous earnings signals; future earnings guidance; earnings announcements; relevance; reliability; market reaction (search for similar items in EconPapers)
JEL-codes: D84 G14 M41 (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/s11142-005-4211-8

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