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The impact of disclosure on the market response to reported earnings


  • Schadewitz, Hannu J.
  • Kanto, Antti J.


There is a wealth of evidence of a certain delay in the market's adjustment to published earnings information. However, there is a shortage of studies focusing on whether this behaviour can be explained at least partially by the level and quality of disclosures released together with earnings. This paper explores whether the degree of disclosure is related to the market reaction, and in particular whether the quantity and quality of disclosure affects the adjustment of security prices to interim earnings announcements. Evidence on the pricing of disclosures is also presented. The data comprises interim reports submitted to the Helsinki Exchanges in the period 1985-93. Interim reports are used because they relate to a specific event conveying new and previously unpublished material to the market, in contrast to annual reports which primarily document the history of the previous year. It is found that both disclosure and earnings are important in explaining drift, and our results indicate that the drift is associated with disclosure. These results augment the non-US market evidence of this drift.

Suggested Citation

  • Schadewitz, Hannu J. & Kanto, Antti J., 2002. "The impact of disclosure on the market response to reported earnings," Scandinavian Journal of Management, Elsevier, vol. 18(4), pages 521-542, December.
  • Handle: RePEc:eee:scaman:v:18:y:2002:i:4:p:521-542

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    Cited by:

    1. Omaima Hassan & Claire Marston, 2010. "Disclosure measurement in the empirical accounting literature - a review article," Accountancy Discussion Papers 1004, Accountancy Research Group, Heriot Watt University.
    2. M. Lambert & G. Hübner & P.-A. Michel & H. Olivier, 2006. "International Financial Reporting Standards and Market Efficiency: A European Perspective," LSF Research Working Paper Series 06-04, Luxembourg School of Finance, University of Luxembourg.

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