Market Reactions to Quarterly Earnings Announcements

Abstract

The information content of earnings is an issue of obvious importance for investors. Company earnings announcements are closely-watched events, being the main source of new information about company performance. The study investigated the impact of Quarterly Earnings announcements on the stocks constituting the Sensex. The study of the effect of clustering of event dates on the overall stock returns has been incorporated in the study. The objective is to check the share price behavior to quarterly earnings announcements. The study includes Top 100 companies rated by Chartered Financial Analyst Survey 2004 and informational efficiency for last ten calendar periods- January, 2004 to December, 2013 has been investigated. The results show that the Indian Capital Market is semi strong efficient as it is using the information relevant for security valuation and for investment decision making. However, the reaction after the announcement shows that the Indian Capital Market is not perfectly efficient as abnormal returns have been observed both prior to and after the announcement. The role of SEBI can be instrumental in preventing insider trading so that the confidence of the investors is maintained and the stock market can become more vibrant and dynamic.

Keywords: Quantity Earnings Announcements, Capital Market, Sensex

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