The Information Content of Earnings Announcements: New Insights from Intertemporal and Cross-Sectional Behavior

William H. Beaver, Maureen McNichols and Zach Z. Wang
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William H. Beaver: Stanford University
Maureen McNichols: Stanford University
Zach Z. Wang: University of IL

Research Papers from Stanford University, Graduate School of Business

Abstract: This study examines the information content of quarterly earnings announcements. We first use a nonparametric approach to investigate whether quarterly earnings announcements are informative between 1971 and 2011 and find unequivocal evidence that earnings announcements convey significantly more information relative to non-announcement periods. We also find that the information content increases over time with a dramatic increase from 2001 onward, a period that includes the implementation of Sarbanes Oxley reforms and the worst economic downturn since the Great Depression. We then investigate cross-sectional variation in information content. We find that the information content of earnings announcements is positively associated with profitability, firm size and analyst coverage.

Date: 2015-03
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