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Information Content of Earnings Announcements: Evidence from After-Hours Trading

Published online by Cambridge University Press:  04 October 2012

Christine X. Jiang ,
Tanakorn Likitapiwat  and
Thomas H. McInish
Christine X. Jiang
Affiliation:
cjiang@memphis.edu
Tanakorn Likitapiwat
Affiliation:
tanakorn.l@chula.ac.th, Faculty of Commerce and Accountancy, Chulalongkorn University, Bangkok, Thailand
Thomas H. McInish
Affiliation:
tmcinish@memphis.edu, Fogelman College of Business and Economics, University of Memphis, Memphis, TN 38152
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Abstract

We study after-hours trading (AHT), price contributions, and price discovery following quarterly earnings announcements released outside of the normal trading hours. For Standard & Poor’s (S&P) 500 index stocks from 2004–2008, AHT is heightened on announcement days. A significant portion of the price change and price discovery occurs immediately after the earnings releases. Prices in AHT show a large degree of informational efficiency, further demonstrating the importance of price discovery in AHT. We also provide evidence suggesting that firms prefer after-hours earnings announcements, as trades are mainly from informed traders, and those trades are relied upon to convey information to the general public.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 47 , Issue 6 , December 2012 , pp. 1303 - 1330
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2012

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