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Earnings announcements in China: Overnight-intraday disparity

Author

Listed:
  • Liu, Junhao
  • Hope, Ole-Kristian
  • Hu, Danqi

Abstract

Based on a unique arrangement of trading and disclosure times around earnings announcements in the Chinese stock market, we provide evidence of a striking overnight-intraday disparity in terms of the reaction to earnings news. Specifically, we find that the overnight period exhibits a strong and consistent reaction to earnings announcements, whereas the intraday period trades against both the earnings news and the prior market reaction during the overnight period. In addition, we show that abnormal overnight returns on earnings announcement days exhibit strong predictability for future stock returns, consistent with the overnight returns containing value-relevant signals. In contrast, we observe no return predictability for abnormal intraday returns on earnings announcement days, which as a result, also undermines the return predictability of abnormal daily returns. We propose possible explanations for the overnight-intraday disparity. We conclude that the differences in trading mechanisms between the two periods as well as in investor composition likely drive the phenomenon.

Suggested Citation

  • Liu, Junhao & Hope, Ole-Kristian & Hu, Danqi, 2023. "Earnings announcements in China: Overnight-intraday disparity," Journal of Corporate Finance, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:corfin:v:82:y:2023:i:c:s0929119923001207
    DOI: 10.1016/j.jcorpfin.2023.102471
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    References listed on IDEAS

    as
    1. Mingyi Hung & Xi Li & Shiheng Wang, 2015. "Post-Earnings-Announcement Drift in Global Markets: Evidence from an Information Shock," The Review of Financial Studies, Society for Financial Studies, vol. 28(4), pages 1242-1283.
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    4. Beaver, William H. & McNichols, Maureen F. & Wang, Zach Z., 2020. "Increased market response to earnings announcements in the 21st century: An Empirical Investigation," Journal of Accounting and Economics, Elsevier, vol. 69(1).
    5. Madhavan, Ananth & Panchapagesan, Venkatesh, 2000. "Price Discovery in Auction Markets: A Look Inside the Black Box," The Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 627-658.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Earnings news; Earnings announcements; Overnight returns; Intraday returns China;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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