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Regularities in the equity price response to earnings announcements in Spain

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  • Maria Jose Arcas Pellicer
  • William Page Rees

Abstract

This paper studies the market's reaction to 660 earnings announcements made during the period 1991-95 in Spain. This period starts shortly after the completion of the revision of Spanish financial accounting practices to bring them into line with EC requirements. As expected, we find that the earnings disclosures are accompanied by abnormal volatility; however, we also discover positive abnormal returns and an upward shift in beta. Furthermore, both expected and unexpected changes in earnings have explanatory power for abnormal returns accompanying earnings announcements - although this result is largely driven by the smaller firms in the sample. This evidence is consistent with a change in the risk-return relationship and with unsophisticated investors neglecting value-relevant information.

Suggested Citation

  • Maria Jose Arcas Pellicer & William Page Rees, 1999. "Regularities in the equity price response to earnings announcements in Spain," European Accounting Review, Taylor & Francis Journals, vol. 8(4), pages 585-607.
    • Handle: RePEc:taf:euract:v:8:y:1999:i:4:p:585-607
    DOI: 10.1080/096381899335727
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    References listed on IDEAS

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    Cited by:

    1. David Abad & José Yagüe & Sonia Sanabria, 2005. "Liquidity And Information Around Annual Earnings Announcements: An Intraday Analysis Of The Spanish Stock Market," Working Papers. Serie EC 2005-16, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Beattie, Vivien, 2005. "Moving the financial accounting research front forward: the UK contribution," The British Accounting Review, Elsevier, vol. 37(1), pages 85-114.
    3. Pascal Dumontier & Bernard Raffournier, 2002. "Accounting and capital markets: a survey of the European evidence," European Accounting Review, Taylor & Francis Journals, vol. 11(1), pages 119-151.
    4. Sonia Sanabria, 2004. "Comportamiento De Los Precios Y Volúmenes De Negociación Ante Anuncios De Beneficios Anuales," Working Papers. Serie EC 2004-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    5. Carlos Forner & Sonia Sanabria, 2010. "Post-Earnings Announcement Drift in Spain and Behavioural Finance Models," European Accounting Review, Taylor & Francis Journals, vol. 19(4), pages 775-815.
    6. 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.
    7. Martinez-Blasco, Monica & Garcia-Blandon, Josep & Vivas-Crisol, Laura, 2016. "El informe de auditoría con salvedades: ¿una mayor independencia y competencia del auditor aumenta su contenido informativo?," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 19(1), pages 89-101.

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