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

  • Afego, Pyemo

This paper examines the stock market reaction to annual earnings information releases using data on the Nigerian Stock Exchange. Using the event study method, the speed of reaction of the market to annual earnings information releases for a sample of 16 firms listed on the exchange is tested. Significant abnormal price reactions around earnings announcements suggest the earnings announcements contain value-relevant information. We find 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, and therefore suggests that the Nigerian stock market does not efficiently adjust to earnings information for the sample firms within the study period.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33931.

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Date of creation: 15 Mar 2011
Date of revision: 16 May 2011
Handle: RePEc:pra:mprapa:33931
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  1. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
  2. Hirshleifer, David, 2001. "Investor Psychology and Asset Pricing," MPRA Paper 5300, University Library of Munich, Germany.
  3. Charles Komla Adjasi & Charles Amo Yartey, 2007. "Stock Market Development in Sub-Saharan Africa: Critical Issues and Challenges," IMF Working Papers 07/209, International Monetary Fund.
  4. Campbell R. Harvey, 1994. "Predictable Risk and Returns in Emerging Markets," NBER Working Papers 4621, National Bureau of Economic Research, Inc.
  5. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, . "What Works in Securities Laws?," Working Paper 19491, Harvard University OpenScholar.
  6. 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, 06.
  7. 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, 05.
  8. Shinichi Hirota & Shyam NMI Sunder, 2002. "Stock Market as a 'Beauty Contest': Investor Beliefs and Price Bubbles sans Dividend Anchors," Yale School of Management Working Papers ysm271, Yale School of Management.
  9. Chaker Aloui, 2003. "Long-Range Dependence in Daily Volatility on Tunisian Stock Market," Working Papers 0340, Economic Research Forum, revised Dec 2003.
  10. 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.
  11. 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(01), pages 117-134, March.
  12. 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.
  13. 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.
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