The Changing Behavior of Trading Volume Reactions to Earnings Announcements: Evidence of the Increasing Use of Accounting Earnings News by Investors

• 成果类型: Article
• 署名作者: Barron, Orie E.; Schneible, Richard A., Jr.; Stevens, Douglas E.
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; State University of New York (SUNY) System; University at Albany, SUNY; University System of Georgia; Georgia State University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12371
• 发表日期: 2018
• 页码: 1651-1674
• 关键词: information-content; PREDISCLOSURE INFORMATION; UNEXPECTED EARNINGS; price; drives

摘要

The increase in investor diversity over the last 35-40 years prompted us to revisit trading volume reactions to earnings announcements and how these reactions vary with firm size. We argue that this increase in investor diversity would likely increase differences in the precision of pre-announcement information around earnings announcements, particularly for large firms. This suggests that the role of earnings announcements in resolving investor disagreement, as reflected in trading volume reactions, has increased. Over the 35-year period 1977-2011, we find a dramatic increase in the magnitude and frequency of volume reactions to earnings announcements, particularly for large firms. 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, 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 increasingly diverse investors following large firms.