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Do First and Third Quarter Unaudited Financial Reports Matter? The Portuguese Case

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  • Carlos Alves
  • F. Teixeira Dos Santos

Abstract

In this paper we investigate the incremental information content of a sample of 1,751 quarterly financial reports, issued in Portugal between 1994 and 2004. Specifically, we examine price and volume reactions to financial reports issued in: (1) the first and third quarters, which are unaudited; (2) the second quarter, which is subject to limited audit; and (3) the fourth quarter (the annual report) which is subject to a full audit. We conclude that unaudited first and third quarter financial reports that include condensed income statements and balance sheets convey enough new information to the market to spur significant price and trading reactions. This conclusion holds before and after the first and third quarter reports were made mandatory in 1999. We also found that the incremental information content of the second quarter report dropped after 1999, presumably because part of its information content was usurped by the newly required first quarter reports. Finally, we found evidence that mandatory audited reports announcements spur more significant price reactions than mandatory unaudited financial reports. In contrast to evidence from other countries, we found that smaller firms' disclosures do not generate a larger reaction than large firms' disclosures.

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  • Carlos Alves & F. Teixeira Dos Santos, 2008. "Do First and Third Quarter Unaudited Financial Reports Matter? The Portuguese Case," European Accounting Review, Taylor & Francis Journals, vol. 17(2), pages 361-392.
    • Handle: RePEc:taf:euract:v:17:y:2008:i:2:p:361-392
    DOI: 10.1080/09638180802156399
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    3. MiloÅŸ Laura Raisa & MiloÅŸ Marius Cristian, 2018. "Accounting Disclosure and Stock Market Reaction. Empirical Analysis on Bucharest Stock Exchange," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 643-648, December.
    4. Carlos Francisco Alves & Ana Luísa Nogueira Parada Ferreira e Silva, 2018. "Coverage news and companies’ stock abnormal returns," FEP Working Papers 608, Universidade do Porto, Faculdade de Economia do Porto.
    5. Dasilas, Apostolos & Leventis, Stergios, 2011. "Stock market reaction to dividend announcements: Evidence from the Greek stock market," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 302-311, April.
    6. Karol Marek Klimczak & Grzegorz Szafrański, 2010. "Valuation Effects Of Accounting Information Availability," Post-Print hal-00481073, HAL.
    7. Ruhnke, Klaus & Schmitz, Stefanie, 2019. "Review engagements – structure of audit firm methodology and its situational application in Germany," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 37(C).

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