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Cross-quarter differential market reactions

Author

Listed:
  • Andrew Lee
  • Chu Yeong Lim
  • Tracey Chunqi Zhang

Abstract

Purpose - The purpose of this paper is to investigate the audit effect hypothesis for the cross-quarter differential market reactions to earnings announcements. Design/methodology/approach - Earnings response coefficients are focused upon as indicators of perceived earnings quality. Findings - The evidence suggests that investors of Singapore listed companies respond more strongly to earnings announcements in the fourth quarter than other interim quarters. The findings support the notion that investors attach different degrees of reliability to interim quarter earnings relative to final quarter earnings. Originality/value - Findings in this paper shed new light on the audit effect hypothesis and are relevant to accounting regulators and audit committee members seeking to enhance the credibility of earnings announcements.

Suggested Citation

  • Andrew Lee & Chu Yeong Lim & Tracey Chunqi Zhang, 2016. "Cross-quarter differential market reactions," Pacific Accounting Review, Emerald Group Publishing Limited, vol. 28(2), pages 219-235, April.
    • Handle: RePEc:eme:parpps:par-07-2015-0030
    DOI: 10.1108/PAR-07-2015-0030
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