IDEAS home Printed from https://ideas.repec.org/a/taf/wjabxx/v14y2013i3p141-149.html
   My bibliography  Save this article

Stock Price Response to Earnings Announcements: Evidence From the Nigerian Stock Market

Author

Listed:
  • Pyemo N. Afego

Abstract

The author examines the stock market reaction to annual earnings information releases using data for a sample of firms on the Nigerian Stock Exchange. Using the event study method, the author found that the magnitude of the cumulative abnormal returns is dominated by significant reactions 20 days before the earnings release date, which suggests that a portion of the market reaction may be due to private acquisition and, possibly, abuse of information by insiders. The persistent downward drift of the cumulative abnormal returns, 20 days after the announcement, is inconsistent with the efficient markets hypothesis.

Suggested Citation

  • Pyemo N. Afego, 2013. "Stock Price Response to Earnings Announcements: Evidence From the Nigerian Stock Market," Journal of African Business, Taylor & Francis Journals, vol. 14(3), pages 141-149, December.
    • Handle: RePEc:taf:wjabxx:v:14:y:2013:i:3:p:141-149
    DOI: 10.1080/15228916.2013.844008
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/15228916.2013.844008
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/15228916.2013.844008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Harvey, Campbell R, 1995. "Predictable Risk and Returns in Emerging Markets," The Review of Financial Studies, Society for Financial Studies, vol. 8(3), pages 773-816.
    2. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 2006. "What Works in Securities Laws?," Journal of Finance, American Finance Association, vol. 61(1), pages 1-32, February.
    3. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    4. Ball, R & Brown, P, 1968. "Empirical Evaluation Of Accounting Income Numbers," Journal of Accounting Research, Wiley Blackwell, vol. 6(2), pages 159-178.
    5. Doron Avramov & Tarun Chordia & Amit Goyal, 2006. "Liquidity and Autocorrelations in Individual Stock Returns," Journal of Finance, American Finance Association, vol. 61(5), pages 2365-2394, October.
    6. Shinichi Hirota & Shyam Sunder, 2002. "Stock Market as a 'Beauty Contest': Investor Beliefs and Price Bubbles sans Dividend Anchors," Yale School of Management Working Papers ysm2, Yale School of Management.
    7. Chaker Aloui, 2003. "Long-Range Dependence in Daily Volatility on Tunisian Stock Market," Working Papers 0340, Economic Research Forum, revised Dec 2003.
    8. Chambers, Ae & Penman, Sh, 1984. "Timeliness Of Reporting And The Stock-Price Reaction To Earnings Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 22(1), pages 21-47.
    9. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    10. William M. Cready & Umit G. Gurun, 2010. "Aggregate Market Reaction to Earnings Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 48(2), pages 289-334, May.
    11. Jason T. Greene & Susan G. Watts, 1996. "Price Discovery on the NYSE and the NASDAQ: The case of Overnight Daytime News Releases," Financial Management, Financial Management Association, vol. 25(1), Spring.
    12. Firth, M, 1981. "The Relative Information-Content Of The Release Of Financial Results Data By Firms," Journal of Accounting Research, Wiley Blackwell, vol. 19(2), pages 521-529.
    13. Olatundun Adelegan, 2003. "Capital Market Efficiency and the Effects of Dividend Announcements on Share Prices in Nigeria," African Development Review, African Development Bank, vol. 15(2‐3), pages 218-236.
    14. Alford, A & Jones, J & Leftwich, R & Zmijewski, M, 1993. "The Relative Informativeness Of Accounting Disclosures In Different Countries," Journal of Accounting Research, Wiley Blackwell, vol. 31, pages 183-223.
    15. Olatundun Janet Adelegan, 2009. "Price Reactions to Dividend Announcements on the Nigerian Stock Market," Working Papers 188, African Economic Research Consortium, Research Department.
    16. Fifield, S G M & Power, D M & Sinclair, C D, 2002. "Macroeconomic Factors and Share Returns: An Analysis Using Emerging Market Data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(1), pages 51-62, January.
    17. Charles Komla Adjasi & Charles Amo Yartey, 2007. "Stock Market Development in Sub-Saharan Africa: Critical Issues and Challenges," IMF Working Papers 2007/209, International Monetary Fund.
    18. Ederington, Louis H. & Lee, Jae Ha, 1995. "The Short-Run Dynamics of the Price Adjustment to New Information," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(1), pages 117-134, March.
    19. Jeffrey Ng & Tjomme O. Rusticus & Rodrigo S. Verdi, 2008. "Implications of Transaction Costs for the Post–Earnings Announcement Drift," Journal of Accounting Research, Wiley Blackwell, vol. 46(3), pages 661-696, June.
    20. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    21. Michael J. Fleming & Eli M. Remolona, 1999. "Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information," Journal of Finance, American Finance Association, vol. 54(5), pages 1901-1915, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ibrahim Mohammed & Chioma Nwafor, 2014. "Stock Market Consequences of the Suspension of the Central Bank of Nigeria’s Governor," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 12(4 (Winter), pages 371-394.
    2. Malthus Timothy Ekpe & Rosemary Obiageri Obasi & Sadiq Rabiu Abdullahi & Umar Aliyu Mustapha & Norfadzilah Rashid, 2020. "Earnings Surprises and Stock Price Reactions of Quoted Companies in Nigeria," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 306-315, July.
    3. Edward A. E. Jones & Anthony K. Kyiu & Hao Li, 2021. "Earnings informativeness and trading frequency: Evidence from African markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 1064-1086, January.
    4. Pius V.C. Okoye & Jane F.N. Okoye & Raymond A. Ezejiofor, 2014. "Impact of the IFRS Adoption on Stock Market Movement in Nigerian Corporate Organization," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(9), pages 202-218, September.
    5. Josef Fink, 2020. "A Review of the Post-Earnings-Announcement Drift," Working Paper Series, Social and Economic Sciences 2020-04, Faculty of Social and Economic Sciences, Karl-Franzens-University Graz.
    6. Fink, Josef, 2021. "A review of the Post-Earnings-Announcement Drift," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    7. Yusuf Musa Muhammad & Kabiru Umar, 2016. "Corporate Crime Announcement and Share Prices of Deposit Money Banks in Nigeria," International Journal of Management Sciences, Research Academy of Social Sciences, vol. 7(6), pages 296-301.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. S. P. Kothari & Charles Wasley, 2019. "Commemorating the 50‐Year Anniversary of Ball and Brown (1968): The Evolution of Capital Market Research over the Past 50 Years," Journal of Accounting Research, Wiley Blackwell, vol. 57(5), pages 1117-1159, December.
    2. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.
    3. Mohit Gupta & Navdeep Aggarwal, 2018. "Signaling Effect of Shifts in Dividend Policy: Evidence from Indian Capital Markets," Business Perspectives and Research, , vol. 6(2), pages 142-153, July.
    4. DeFond, Mark & Hung, Mingyi & Trezevant, Robert, 2007. "Investor protection and the information content of annual earnings announcements: International evidence," Journal of Accounting and Economics, Elsevier, vol. 43(1), pages 37-67, March.
    5. Thomas Schuster, 2003. "News Events and Price Movements. Price Effects of Economic and Non-Economic Publications in the News Media," Finance 0305009, University Library of Munich, Germany.
    6. Monica Martinez-Blasco & Vanessa Serrano & Francesc Prior & Jordi Cuadros, 2023. "Analysis of an event study using the Fama–French five-factor model: teaching approaches including spreadsheets and the R programming language," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-34, December.
    7. Abul Shamsuddin & Jae H. Kim, 2010. "Short‐Horizon Return Predictability in International Equity Markets," The Financial Review, Eastern Finance Association, vol. 45(2), pages 469-484, May.
    8. Kenneth W. Clements & Liang Li, 2014. "Valuing Resource Investments," Economics Discussion / Working Papers 14-27, The University of Western Australia, Department of Economics.
    9. Chang, C-L. & Hsu, S.-H. & McAleer, M.J., 2018. "An Event Study of Chinese Tourists to Taiwan," Econometric Institute Research Papers 2018-003/III, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    10. AitSahlia, Farid & Yoon, Joon-Hui, 2016. "Information stages in efficient markets," Journal of Banking & Finance, Elsevier, vol. 69(C), pages 84-94.
    11. Pevzner, Mikhail & Xie, Fei & Xin, Xiangang, 2015. "When firms talk, do investors listen? The role of trust in stock market reactions to corporate earnings announcements," Journal of Financial Economics, Elsevier, vol. 117(1), pages 190-223.
    12. Vicentina Gomes, Liliane & Odálio dos Santos, José & Lana Silva, Cristiane & Ferreira de Souza, Maurício, 2018. "Divulgações de informações e o efeito no retorno de ações da maior empresa de educação listada na B3 (Brasil, Bolsa, Balcão) [Information disclosures and the effect on the return of stocks of the l," MPRA Paper 93123, University Library of Munich, Germany, revised 30 May 2018.
    13. Pascal Dumontier & Bernard Raffournier, 2002. "Accounting and capital markets: a survey of the European evidence," European Accounting Review, Taylor & Francis Journals, vol. 11(1), pages 119-151.
    14. Md Lutfur Rahman & Mahbub Khan & Samuel A. Vigne & Gazi Salah Uddin, 2021. "Equity return predictability, its determinants, and profitable trading strategies," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(1), pages 162-186, January.
    15. Qianwei Ying & Tahir Yousaf & Qurat ul Ain & Yasmeen Akhtar & Muhammad Shahid Rasheed, 2019. "Stock Investment and Excess Returns: A Critical Review in the Light of the Efficient Market Hypothesis," JRFM, MDPI, vol. 12(2), pages 1-22, June.
    16. Imane El Ouadghiri & Valérie Mignon & Nicolas Boitout, 2016. "On the impact of macroeconomic news surprises on Treasury-bond returns," Annals of Finance, Springer, vol. 12(1), pages 29-53, February.
    17. Kothari, S.P. & Ramanna, Karthik & Skinner, Douglas J., 2010. "Implications for GAAP from an analysis of positive research in accounting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 246-286, December.
    18. Sylwia Nowak, 2008. "How Do Public Announcements Affect The Frequency Of Trading In U.S. Airline Stocks?," CAMA Working Papers 2008-38, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    19. Imane El Ouadghiri & Valerie Mignon & Nicolas Boitout, 2014. "On the impact of macroeconomic news surprises on Treasury-bond yields," EconomiX Working Papers 2014-20, University of Paris Nanterre, EconomiX.
    20. Bartram, Söhnke M. & Grinblatt, Mark, 2021. "Global market inefficiencies," Journal of Financial Economics, Elsevier, vol. 139(1), pages 234-259.

    More about this item

    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)

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:wjabxx:v:14:y:2013:i:3:p:141-149. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/wjab20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.