The effect of Industry Homogeneity on the Magnitude of Post- earnings Announcement Drift: Evidence from Korea

Heejeong Shin (), Su-In Kim, Sorah Park and Hyejeong Shin
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Heejeong Shin: School of Business, Ewha Womans University, 52, Ewhayeodae-gil, Seodaemun-gu, Seoul 03760, South Korea
Su-In Kim: College of Business Management, Hongik University, 2639, Sejong-ro, Jochiwon-eup, Sejong 30016, South Korea
Sorah Park: School of Business, Ewha Womans University, 52, Ewhayeodae-gil, Seodaemun-gu, Seoul 03760, South Korea
Hyejeong Shin: Department of Business Administration, Kyonggi University, 154-42, Gwanggyosan-ro, Yeongtong-gu, Suwon, Gyeonggi-do, 16227, South Korea

Asian Academy of Management Journal of Accounting and Finance (AAMJAF), 2019, vol. 15, issue 1, 107-127

Abstract: We examine the relationship between industry homogeneity and the magnitude of post-earnings announcement drift (hereafter, PEAD). Given that firms with more homogeneous operating cost structure are conducive to spillover of knowledge among investors, we expect that firms in highly homogenous industries have relatively low magnitude of PEAD. Using firms listed on the Korean Stock Exchange, we find that the magnitude of PEAD is negatively related to industry homogeneity, indicating that investors are more efficient for firms in a highly homogenous industry in which information is likely to be referred to peer firms. In addition, we find that the effect of industry homogeneity on the magnitude of PEAD is robust even after controlling to the effect of industry concentration. Our study contributes to the literature on exploring determinants of PEAD by linking information transfer effect in a homogenous industry to investorsí informational efficiency in capital markets.

Keywords: Industry homogeneity; knowledge spillover; information transfer; post-earnings announcement drift; information efficiency (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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