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Competitive earnings news and post-earnings announcement drift

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  • Baker, H. Kent
  • Ni, Yang
  • Saadi, Samir
  • Zhu, Hui

Abstract

Using a large sample covering the period 1996–2015, we find a positive relation between the return of the announced firm on the date of peer firms' announcements and industry-wide earnings news of peer firms. Our results imply that same-industry-peer earnings announcements play a role in the analyst forecast-based drift, and are consistent with the notion of intra-industry information transfers. Additional analyses show that economic conditions and the relative size of the rival firms can affect the nature and magnitude of the link between announced firm's return surrounding the date of the rival firm's announcements and the rival firms' industry-wide component of earnings surprises. We also document evidence that is more consistent with analyst forecast-based drift reflecting investors exhibiting limited attention behavior as opposed to investors' conservatism bias. Our results are robust across different estimations and clustering procedures.

Suggested Citation

  • Baker, H. Kent & Ni, Yang & Saadi, Samir & Zhu, Hui, 2019. "Competitive earnings news and post-earnings announcement drift," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 331-343.
    • Handle: RePEc:eee:finana:v:63:y:2019:i:c:p:331-343
    DOI: 10.1016/j.irfa.2017.02.002
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    More about this item

    Keywords

    Post-earnings announcement drift; Industry-wide earnings news; Subsequent earnings announcements;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • 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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