Evolution of Shares Market Price During the Company’s Financial Results Announcement. Event Study Approach

Marianna Botika
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Marianna Botika: Department of Finance, The Bucharest Academy of Economic Studies, Romania

Timisoara Journal of Economics, 2012, vol. 5, issue 17, 96–118

Abstract: The research paper studied the evolution of shares market price during the company’s financial result announcement. The research is based on event study methodology. The author paid careful attention to data selection, correct methodology approach and results’ interpretation. 18 listed companies were taken to be studied. The companies had to respect two of next tree conditions: to have a public trade history for at least the past four years, to be a 1st category company, or to represents at least 1% from BET-C (composite index of the Bucharest Stock Exchange). All 18 companies strictly respected at least two conditions. The case study window was a new challenge. In order to get a correct output the author must ensure that there are no other events which can influence the analyzed data. Optimal window length was established for 21 day: 10 days before, event day, and 10 days after it. The research output was quite predictable: the announcement of financial results does not bring shocking behavior for shares’ market price. Abnormal registered returns have relatively small values. The risk which can be associated with this event is about 1.5%. The overall market behavior may be viewed as semi-strong efficient behavior. The paper was oriented towards testing the operational functionality of the Romanian capital market which is proved to be in very good condition and bring the strong evidence of market semi-strong efficiency. The author contributes with a new research regarding the Romanian market efficiency using the event study approach.

Keywords: event study; financial report; average return; abnormal return; cumulate abnormal return (search for similar items in EconPapers)
JEL-codes: G11 G14 G17 (search for similar items in EconPapers)
Date: 2012
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