 Profit warnings: will openness be rewarded?Matthew Church and Han Donker Applied Economics Letters, 2010, vol. 17, issue 7, 633-637 Abstract: We investigate the information content of profit warnings released by firms on the abnormal returns for a sample of 149 firms listed on the Euronext Amsterdam in 2000-2002. We propose that firms can diminish the negative influence of profit warnings on shareholder's returns by releasing detailed information, thereby reducing the information asymmetry between shareholders and management. We find empirical evidence that a greater degree of disclosure has a significantly positive impact on the abnormal returns of firms with multiple successive profit warnings. We argue that negative abnormal returns will occur with firms which provide external reasons in their press releases indicating that the causes of the current situation are a market-wide phenomenon and beyond their scope. We report a negative - but not significant - impact of information regarding external reasons on the abnormal returns to shareholders of firms with profit warnings. Our research findings offer valuable insights into the practical implications of the information content of profit warnings. Date: 2010 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:17:y:2010:i:7:p:633-637 Ordering information: This journal article can be ordered from DOI: 10.1080/17446540802298043 Access Statistics for this article Applied Economics Letters is currently edited by Anita Phillips More articles in Applied Economics Letters from Taylor & Francis Journals |
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