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The information content of earnings announcements in Denmark

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  • Carina Sponholtz

Abstract

Purpose - The purpose of this paper is to examine the reaction to earnings announcements in a small stock market. Design/methodology/approach - The paper uses the traditional event study method to examine the information content of annual earnings announcements in the small Danish stock market from 1999‐2004. Findings - The paper finds abnormal volatility in the days surrounding the announcements, indicating that they contain relevant information for the stock market. The abnormal volatility persists several days after the announcement, suggesting that the information environment of this small stock market works to decrease the speed of adjustment. In addition to this sign of inefficiency, the paper finds significant positive abnormal returns accompanying the announcements. These results are robust across various methodologies. Surprisingly, the paper finds a positive correlation between the information content and predisclosure information. This contradicts previous studies, and it is interpreted as evidence of a low level of pre‐announcement information. Confirming the results of similar studies, the paper finds that unexpected earnings are best proxied using a model based on consensus analyst forecasts. Originality/value - This paper contributes to the existing literature by analyzing the information content of earnings announcements in a small stock market with accounting standards that are congruent with the International Accounting Standards.

Suggested Citation

  • Carina Sponholtz, 2008. "The information content of earnings announcements in Denmark," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 4(1), pages 4-36, January.
    • Handle: RePEc:eme:ijmfpp:v:4:y:2008:i:1:p:4-36
    DOI: 10.1108/17439130810837366
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    Citations

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    Cited by:

    1. Yekini, Liafisu Sina & Wisniewski, Tomasz Piotr & Millo, Yuval, 2016. "Market reaction to the positiveness of annual report narratives," The British Accounting Review, Elsevier, vol. 48(4), pages 415-430.
    2. Chia-Ling Chao & Shwu-Min Horng, 2013. "Asset write-offs discretion and accruals management in Taiwan: the role of corporate governance," Review of Quantitative Finance and Accounting, Springer, vol. 40(1), pages 41-74, January.

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