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Post-Earnings-Announcement Drift in Global Markets: Evidence from an Information Shock

Author

Listed:
  • Xi Li

    (Department of Accounting, Hong Kong University of Science and Technology
    Institute for Emerging Market Studies, Hong Kong University of Science and Technology)

  • Mingyi Hung

    (Department of Accounting, Hong Kong University of Science and Technology
    Institute for Emerging Market Studies, Hong Kong University of Science and Technology)

  • Shiheng Wang

    (Department of Accounting, Hong Kong University of Science and Technology)

Abstract

We investigate whether and how an exogenous and unprecedented improvement in non-U.S. firms’ financial reporting quality affects post-earnings-announcement drift (PEAD). We find that PEAD declines after the information shock, and this decrease is more pronounced for firms with fewer concurrent earnings announcements, greater institutional holdings, and lower limits to arbitrage. In addition, the decrease in PEAD is driven by firms with greater changes in financial reporting, an increase in analyst forecast accuracy and institutional ownership, and a decrease in limits to arbitrage. These findings support the mispricing explanation of PEAD, in particular the limited attention hypothesis, in an international setting.

Suggested Citation

  • Xi Li & Mingyi Hung & Shiheng Wang, 2015. "Post-Earnings-Announcement Drift in Global Markets: Evidence from an Information Shock," HKUST IEMS Working Paper Series 2015-17, HKUST Institute for Emerging Market Studies, revised Mar 2015.
    • Handle: RePEc:hku:wpaper:201517
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    More about this item

    Keywords

    information and market efficiency; information shock; global markets; post-earnings-announcement drift;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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