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Does financial statement comparability mitigate delayed trading volume before earnings announcements?

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  • Kim, Junwoo
  • Kim, Robert
  • Kim, Sangwan

Abstract

This paper examines the role of financial statement comparability in shaping trading volume prior to earnings announcements. We find that the degree of delayed trading volume prior to earnings announcements is less pronounced for firms with more comparable financial statements. In addition, the effect of financial statement comparability on pre-announcement trading volume is stronger in more opaque information environments. Our findings are incrementally significant after controlling for a comprehensive set of within-firm earnings attributes and robust to various research design choices including alternative comparability models with differing peer group selection. Collectively, our results show that financial statement comparability serves an integral mechanism facilitating a firm’s pre-existing information environment. In sum, this paper constitutes the first, volume-based evidence which lends support to the usefulness of financial statement comparability in investors’ trading activity.

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  • Kim, Junwoo & Kim, Robert & Kim, Sangwan, 2020. "Does financial statement comparability mitigate delayed trading volume before earnings announcements?," Journal of Business Research, Elsevier, vol. 107(C), pages 62-75.
    • Handle: RePEc:eee:jbrese:v:107:y:2020:i:c:p:62-75
    DOI: 10.1016/j.jbusres.2019.09.031
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    More about this item

    Keywords

    Financial statement comparability; Trading volume; Earnings announcements; Information environment; Information asymmetry;
    All these keywords.

    JEL classification:

    • 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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