Download or read book Evidence of a Recent Increase in the Usefulness of Quarterly Earnings Announcements written by Michael J. Smith and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: I document a recent increase in the usefulness of quarterly earnings announcements. I measure the usefulness of earnings announcements as the percentage of total annual excess returns that occurs on or around quarterly earnings announcements. In the main sample, approximately 18.4% of uncertainty is resolved by quarterly earnings announcements from 2002-2005 compared to 14.5% from 1976-2001, an increase of 27%. I include firm-specific controls for variations in an individual firm's underlying characteristics, information environment, voluntary disclosure, and a proxy for the amount of other information in earnings announcements. I create a quarterly variation of my annual measure, allowing me to track changes in usefulness on a month-by-month basis. Informal analysis suggests that the increase in usefulness begins in June 2002, the first month for which the filing date of the 10-Ks and 10-Qs associated with the earnings announcements is after the implementation of, and therefore subject to, SOX.
Download or read book What do the S P 500 Disclose in Their Earnings Announcements Evidence on Financial Statements and Non GAAP Financial Measures written by Ana Cristina Marques and published by . This book was released on 2008 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent increase in the usefulness of earnings announcements is associated with the disclosure of income statements (Francis et al., 2002) and non-GAAP financial measures (Collins et al., 2005). This paper extends these results by investigating the disclosure and informativeness of non-GAAP financial statements and certain aspects of the disclosure of non-GAAP financial measures, analyzing quarterly earnings announcements' press releases of a sample of Samp;P500 firms during the 2001-2003 period. There are three main results. First, both the reconciliation and the non-GAAP consolidated statement of income have information content. Second, the study of the patterns of firms' disclosure of non-GAP financial measures indicates that out of 358 firms, 68% disclosed some non-GAAP financial measure in all the three years - thus, contrary to what was suggested by previous research (e.g.: Allee et al, 2007), this disclosure is not sporadic. Finally, an analysis of the emphasis given to non-GAAP financial measures indicates that, in 2003, the relative emphasis is significantly higher in the cases where the GAAP earnings number does not reach a certain threshold but the non-GAAP earnings number does. This suggests that managers respond to economic motivations when deciding how much emphasis should de given to non-GAAP earnings.
Download or read book STOCK PRICE REACTIONS TO EARNINGS ANNOUNCEMENTS A written by VICTOR L. BERNARD and published by . This book was released on 1992 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Increased Importance of Earnings Announcements After Regulation FD written by Ron Lazer and published by . This book was released on 2004 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Changing Nature of Trading Volume Reactions to Earnings Announcements written by Richard A. Schneible Jr. and published by . This book was released on 2008 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We document a change in the nature of trading volume reactions to quarterly earnings announcements over the time period 1976-2005. Consistent with Landsman and Maydew (2002), we find that the magnitude of abnormal trading volume around quarterly earnings announcements has increased over time and that this increase is greater for large firms than small firms. We show, however, that this trend has reversed the negative relation between firm size and trading volume documented by Bamber (1987). Applying insights from recent trading volume theory, we predict and provide evidence that the increase in abnormal trading volume across time and firm size is due to increases in pre-announcement private information. Specifically, we show that the component of abnormal trading volume associated with price change, which theory suggests reflects pre-announcement private information, is increasing across time and firm size. Our results suggest that investors are motivated to acquire private information prior to earnings announcements about firms that have relatively high quality information environments. Thus, our results have implications for policies aimed at reducing information asymmetry between investors by increasing public disclosure.
Download or read book Announcement Timing and News Content of Quarterly Earnings Reports written by Krishna Palepu and published by . This book was released on 1985 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Discretionary Reporting of Earnings Components written by Catherine M. Schrand and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides evidence that in quarterly earnings announcements, managers use discretion to strategically report a large, transitory component of prior-period earnings. Managers are more likely to report separately a prior-period transitory gain from the sale of property, plant, and equipment (PPE) than to report a loss. This strategy provides the lowest possible benchmark to evaluate current earnings, thereby allowing the manager to highlight the largest possible change in earnings. This strategic reporting behavior is consistent with a conjecture by managers that investors will forget the transitory nature of the prior-period gain/loss unless it is separately reported in the current earnings announcement. Consistent with this conjecture of an investor processing bias, the stock price reactions suggest that the market does not unravel the strategic reporting at the time earnings are announced. There is some evidence that the market corrects for this bias in the 30 days subsequent to the earnings announcement date.
Download or read book The Influence of Quarterly Earnings Announcements on Investor Decisions as Reflected in Common Stock Price Changes written by Robert G. May and published by . This book was released on 1970 with total page 360 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book How Much New Information is There in Earnings written by Ray Ball and published by . This book was released on 2009 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: We quantify the relative importance of earnings announcements in providing new information to the share market, using the r-squared in a regression of securities' calendar year returns on their four quarterly earnings announcement window returns. The r-squared, which averages approximately five to nine percent, measures the proportion of total information incorporated in share prices over a year that is associated with earnings announcements. We conclude that the average quarterly announcement is associated with approximately one to two percent of total annual information and one quarter of one percent of annual trading volume, thus providing only a modest amount of incremental information to the market. The results are consistent with the view that the primary economic role of reported accounting earnings is not to provide timely new information to the share market, and by inference lies elsewhere, for example in settling contracts (Watts and Zimmerman, 1986) and in disciplining prior expectational information (Gigler and Hemmer, 1998; Ball, 2001). We also report increased information during earnings announcement windows in recent years, particularly in larger firms, due in part to increased concurrent releases of management forecasts. There is a convex relation between relative informativeness during earnings event windows and firm size. There is no evidence of abnormal information arrival in the weeks surrounding earnings announcements. Substantial information is released in analyst forecast revisions prior to earnings announcements, but not after.
Download or read book The Changing Behavior of Trading Volume Reactions to Earnings Announcements written by Orie E. Barron and published by . This book was released on 2016 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: The increase in investor diversity over the last 35-40 years (ICI 2014) prompted us to revisit trading volume reactions to earnings announcements and how these reactions vary with firm size. This increase in investor diversity would likely lead to an increase in differences in the precision of pre-announcement information and potentially increase the importance of earnings announcements to resolve investor disagreement. We find that the nature of trading volume reactions to earnings announcements has fundamentally changed over the 35-year time period 1977-2011. There has been a dramatic increase in the magnitude and frequency of volume reactions to earnings announcements over this time period, and this effect is more pronounced in large firms where volume reactions were previously infrequent. The increase in large firms' trading volume reactions is so pronounced that the relation between volume reactions and firm size has turned positive in recent years, thereby reversing Bamber's (1986, 1987) previously documented negative relation. We provide intuition and empirical evidence that our results are attributable to the resolution of differential prior precision among an increasingly diverse set of investors following large firms.
Download or read book What Insiders Know About Future Earnings and How They Use it written by Bin Ke and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides evidence that insiders possess, and trade upon, knowledge of specific and economically-significant forthcoming accounting disclosures as long as two years prior to the disclosure. Stock sales by insiders increase three to nine quarters prior to a break in a string of consecutive increases in quarterly earnings. Insider stock sales are greater for growth firms, before a longer period of declining earnings, and when the earnings decline at the break is greater. Consistent with avoiding an established legal jeopardy, there is little abnormal selling in the two quarters immediately prior to the break.
Download or read book The Handbook of Equity Market Anomalies written by Leonard Zacks and published by John Wiley & Sons. This book was released on 2011-08-24 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: Investment pioneer Len Zacks presents the latest academic research on how to beat the market using equity anomalies The Handbook of Equity Market Anomalies organizes and summarizes research carried out by hundreds of finance and accounting professors over the last twenty years to identify and measure equity market inefficiencies and provides self-directed individual investors with a framework for incorporating the results of this research into their own investment processes. Edited by Len Zacks, CEO of Zacks Investment Research, and written by leading professors who have performed groundbreaking research on specific anomalies, this book succinctly summarizes the most important anomalies that savvy investors have used for decades to beat the market. Some of the anomalies addressed include the accrual anomaly, net stock anomalies, fundamental anomalies, estimate revisions, changes in and levels of broker recommendations, earnings-per-share surprises, insider trading, price momentum and technical analysis, value and size anomalies, and several seasonal anomalies. This reliable resource also provides insights on how to best use the various anomalies in both market neutral and in long investor portfolios. A treasure trove of investment research and wisdom, the book will save you literally thousands of hours by distilling the essence of twenty years of academic research into eleven clear chapters and providing the framework and conviction to develop market-beating strategies. Strips the academic jargon from the research and highlights the actual returns generated by the anomalies, and documented in the academic literature Provides a theoretical framework within which to understand the concepts of risk adjusted returns and market inefficiencies Anomalies are selected by Len Zacks, a pioneer in the field of investing As the founder of Zacks Investment Research, Len Zacks pioneered the concept of the earnings-per-share surprise in 1982 and developed the Zacks Rank, one of the first anomaly-based stock selection tools. Today, his firm manages U.S. equities for individual and institutional investors and provides investment software and investment data to all types of investors. Now, with his new book, he shows you what it takes to build a quant process to outperform an index based on academically documented market inefficiencies and anomalies.
Download or read book Productivity Innovation and Economic Performance written by Ray Barrell and published by Cambridge University Press. This book was released on 2000-06-15 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book compares and explains differences in levels of incomes among industrialised countries.
Download or read book Information Content of Earnings Announcements written by Christine X. Jiang and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We study after-hours trading (AHT), price contributions, and price discovery following quarterly earnings announcements released outside of the normal trading hours. For Standard & Poor's (S&P) 500 index stocks from 2004-2008, AHT is heightened on announcement days. A significant portion of the price change and price discovery occurs immediately after the earnings releases. Prices in AHT show a large degree of informational efficiency, further demonstrating the importance of price discovery in AHT. We also provide evidence suggesting that firms prefer after-hours earnings announcements, as trades are mainly from informed traders, and those trades are relied upon to convey information to the general public.
Download or read book Stock Price Reactions to On Target Earnings Announcements Implications for Earnings Management written by William R. Baber and published by . This book was released on 2012 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the consequences of earnings management by analyzing stock price reactions to on-target quarterly earnings announcements (earnings that coincide with analysts' consensus expectations) during 1993-1999. We use techniques advanced in Jones (1991), Kang and Sivaramakrishnan (1995), and Collins and Hribar (2000) to distinguish observations where firms apparently manage earnings in order to meet expectations. We find that mean security returns during the earnings announcement period are 0.18% to 0.91% less for observations where firms apparently increase earnings than for those where firms apparently decrease earnings to meet expectations. These differences are statistically significant at conventional levels. We also find that returns during the earnings disclosure period vary inversely with the extent that firms appear to manage earnings upward. Overall, the evidence suggests that market participants are aware of incentives to manage earnings to meet expectations, and that they discount managed earnings components when interpreting quarterly earnings disclosures. Finally, we point out that the issue of stock splits should be investigated with care when using published consensus analyst forecasts.
Download or read book The Use of Advertising Activities to Meet Earnings Benchmarks written by Daniel A. Cohen and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a unique database of monthly advertising spending in media outlets, we examine whether managers engage in real earnings management to meet quarterly financial reporting benchmarks. We extend prior literature by: (1) separately analyzing advertising activities, allowing us to explore novel issues such as the possibility that managers could either reduce or boost advertising to meet an earnings benchmark; (2) analyzing actual activities as opposed to inferring them from reported expenses, which are also subject to accrual choices; (3) investigating the timing, within a fiscal quarter, of altered advertising spending; and (4) examining quarterly as opposed to annual earnings benchmarks. Overall, we find that managers reduce their advertising spending to avoid losses and avoid earnings decreases. However, we also provide evidence that firms in the late stages of their life cycle choose to increase advertising to meet earnings benchmarks. Finally, we find some evidence that firms increase their advertising activities in the third month of a fiscal quarter and in the fourth quarter to meet or beat prior year's earnings.
Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.
