Further Evidence on the Strategic Timing of Earnings News PDF Download

Author: Roni Michaely
Publisher:
ISBN:
Category :
Languages : en
Pages : 51

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Book Description
Using combinations of weekdays and times of day (before, during, and after trading hours) of earnings announcements, we examine whether managers attempt to strategically time these announcements. We document that the worst earnings news is announced on Friday evening and find robust evidence that only Friday evening announcements represent managers' rational opportunistic behavior. Friday evening announcements are followed by insider trading in the direction of earnings news and the largest post-earnings announcement drift. Managers also attempt to reduce interaction with investors and hide more than just earnings news by announcing on Friday evening. We find that Friday evening announcements occur later in the evening than announcements on other evenings, firms have a reduced propensity to hold conference calls, and major firm restructuring events are relatively more likely to occur after Friday evening announcements.

Author: Jeffrey T. Doyle
Publisher:
ISBN:
Category :
Languages : en
Pages : 44

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Book Description
Beginning with Patell and Wolfson (1982), several papers have documented that earnings announcements made after the market closes and/or on Fridays tend to contain worse earnings news than those made at other times. One hypothesis is that opportunistic managers release earnings at these times of decreased media attention to quot;hidequot; their bad news and reduce the associated market penalty. Using firm-level tests that focus on only those firms that switch their disclosure timing (rather than consistently report at the same time), we find no evidence that managers opportunistically report worse news after the market closes or on Fridays. We then explore other determinants of the timing decision, including the more benign hypothesis that managers with worse earnings news release earnings after the market closes to more broadly disseminate the information. Consistent with desiring more time for the market to assimilate the announcement, we find some evidence that more complex firms tend to announce earnings after the market closes. We also find that these announcements are associated with greater abnormal volume, possibly indicating a successful dissemination strategy. We also find that the corporate headquarters location, the size of the firm, the number of analysts covering the firm, and industry membership are all significant explanatory variables for the timing decision. Overall, our findings are consistent with efficient capital markets that are effective at monitoring new information, regardless of the time of the announcement.

Author: Cameron Truong
Publisher:
ISBN:
Category :
Languages : en
Pages : 31

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Book Description
In recent period, earnings announcement time is relatively invariable for a firm. There is evidence of strong preference to a certain time outside trading hours for earnings disclosure. Using firm specific regressions, I show that earnings response coefficient (ERCs) differ across firms. However, there is no evidence of differential ERCs to a certain earnings announcement time. By suddenly switching to a different announcement time from its preferred time, firms do not gain any softer market reaction. I compare research results from firm specific method and from pooled timeseries and cross-sectional method and demonstrate that they differ significantly due to large heterogeneity across firms. I suggest that researchers should adopt firm specific approach to avoid misleading results and to achieve improved estimations.

Author: Jeffrey T. Doyle
Publisher:
ISBN:
Category :
Languages : en
Pages : 41

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Book Description
In this study, we examine the strategic intraday and intraweek timing of management forecast announcements based on whether they contain good or bad news. In contrast to past research using highly visible earnings announcements, unscheduled voluntary management forecasts provide a setting in which there may be greater benefits to strategic announcement timing. We find strong evidence that bad news tends to be strategically released after the market closes and on Fridays. In addition, we find evidence that strategically timed bad news forecast announcements that are released after the market closes are associated with less negative market returns, less trading volume, and less market volatility. Thus, our results suggest that the strategic timing of bad news forecasts during times of lower investor attention is successful at mitigating negative market reactions.

Author: Kerry Xiao
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Book Description
Earnings expectation aggregates all available information. However, investors with limited attention are unlikely to behave in such rational fashions. For example, salient information is overweighed in the expectation. This bias could be exploited by sophisticated market participants like analysts. In this study, I document that the market reacts more strongly to forecasts revised during trading hours when investors pay more attention, indicating that the benchmark of the earnings game is primarily determined by salient forecasts. I also find that analyst forecasts are revised more downward during trading hours, especially when earnings announcement day is approaching, showing that analysts strategically timing their forecasts. Collectively, my evidence suggests that analysts make the market expectation be more easily met or beaten by taking advantage of investor's behavioral bias.

Author: Benjamin Segal
Publisher:
ISBN:
Category :
Languages : en
Pages : 51

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Book Description
Using a comprehensive sample of non-earnings 8-K filings from 2005-2013, we examine whether firms engage in strategic reporting of mandatory and voluntary news. In particular, we examine whether firms report negative news when investor attention is low, and whether firms bundle positive and negative news. Our findings support the notion that managers believe in the existence of investor inattention and engage in strategic disclosure by reporting negative news after trading hours. These results particularly apply to public firms, where equity market pressures provide stronger incentives to mitigate market reaction to news by exploiting investor inattention. Further analysis of the market reaction to strategic disclosure uncovers no evidence of investor inattention, consistent with market efficiency. We also observe that public firms are more likely to engage in strategic disclosure through news bundling and that the likelihood of strategic disclosure through bundling increases with the likelihood of strategic disclosure through timing.

Author: John Shon
Publisher: Financial Times/Prentice Hall
ISBN: 9780137084920
Category : Business enterprises
Languages : en
Pages : 0

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Book Description
Profit from earnings announcements, by taking targeted, short-term option positions explicitly timed to exploit them! Based on rigorous research and huge data sets, this book identifies the specific earnings-announcement trades most likely to yield profits, and teaches how to make these trades--in plain English, with real examples! Trading on Corporate Earnings News is the first practical, hands-on guide to profiting from earnings announcements. Writing for investors and traders at all experience levels, the authors show how to take targeted, short-term option positions that are explicitly timed to exploit the information in companies' quarterly earnings announcements. They first present powerful findings of cutting-edge studies that have examined market reactions to quarterly earnings announcements, regularities of earnings surprises, and option trading around corporate events. Drawing on enormous data sets, they identify the types of earnings-announcement trades most likely to yield profits, based on the predictable impacts of variables such as firm size, visibility, past performance, analyst coverage, forecast dispersion, volatility, and the impact of restructurings and acquisitions. Next, they provide real examples of individual stocks-and, in some cases, conduct large sample tests-to guide investors in taking advantage of these documented regularities. Finally, they discuss crucial nuances and pitfalls that can powerfully impact performance.

Author: Stefano DellaVigna
Publisher:
ISBN:
Category :
Languages : en
Pages : 49

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Book Description
Do firms time the release of news in response to investor inattention? We consider news about earnings and analyze the reaction of investors to announcements on Friday and on other weekdays. The day of the week for the announcement has two main effects on stock returns. First, the short-term response to Friday earnings announcements is 20 percent smaller than the response on other days of the week. Second, the post-earnings drift is 70 percent larger for Friday announcements. These stylized facts suggest that weekends distract investor attention temporarily. Consistent with this interpretation, trading volume around announcement day increases 20 percent less for Friday than for non-Friday announcements. The empirical evidence supports models of post-earning announcement drift based on underreaction to information due to cognitive constraints. We also show that firms appear to respond to investor distraction by releasing worse announcements on Friday. Friday releases are associated with a 25 percent higher probability of a negative earnings surprise and a 50 basis points lower abnormal stock return. Finally, we document a similar pattern of strategic behavior for political decisions. The US President is 25 percent less likely to sign executive orders or legislation containing good news on Friday.

Author: Suzie Noh
Publisher:
ISBN:
Category :
Languages : en
Pages : 39

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Book Description
This study provides evidence on firms' incentives to strategically time their earnings announcements. I propose and implement a novel approach to isolating the impact of the relative ordering of different firms' earnings announcements on market outcomes. This approach relies on quasi-exogenous variation in the relative timing of earnings announcements driven by the specific day-of-week on which a calendar month begins. I refer to the resulting variation in firms' relative timing as 'calendar rotations,' which are uncorrelated with various earnings- and market-based proxies for the news content of firms' announcements. I show firms whose earnings announcements are moved forward due to calendar rotations receive greater media coverage of earnings news, experience less preemption of earnings news, and display larger earnings response coefficient (ERC). Together, these results suggest one reason why managers accelerate good-news announcements and delay bad-news announcements is that doing so influences the extent of media exposure and the speed of stock price discovery to their advantage.

Author: Ping Zhou
Publisher: FT Press
ISBN: 0132947404
Category : Business & Economics
Languages : en
Pages : 258

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Book Description
By trading on corporate earnings, investors can reliably profit in both up and down markets, while avoiding market risk for nearly the entire quarter. In this book, two leading traders and portfolio managers present specific, actionable techniques anyone can use to capture these sizable profits. Ping Zhou and John Shon have performed an unprecedented empirical analysis of thousands of stocks, reviewing tens of millions of data points associated with option prices, earnings announcement returns, and fundamentals. Their massive analysis has identified consistent opportunities associated with focusing on the magnitude of the market’s reaction to earnings, not its direction. Option Trading Set-Ups for Corporate Earnings News offers concrete guidance for improving the likelihood of making correct forecasts, and managing the risks of incorrect forecasts. It introduces several ways to exploit option trading opportunities around earnings news, discuss crucial issues that most retail investors haven’t considered, and explore aspects of earnings-related option trading that have never been empirically examined and documented before. For example, they identify hidden patterns and potential opportunities based on valuation, industry, volatility, analyst forecasts, seasonality, and trades that immediately follow earnings announcements. Simply put, trading on earnings reports offers immense profit opportunities, if you know how. This book provides incontrovertible facts and detailed strategies, not just theories and anecdotes!