Price and Volume Reactions to Quarterly Earnings Announcements and Predisclosure Information Asymmetry

Jeong-Bon Kim; Itzhak Krinsky; Jason Lee

doi:10.1080/10293574.1998.10510544

Price and Volume Reactions to Quarterly Earnings Announcements and Predisclosure Information Asymmetry

Jeong-Bon Kim
, Itzhak Krinsky
, Jason Lee

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

Abstract

The paper empirically investigates Kim and Verrecchia's (1991) theoretical proposition that trading volume reaction to public announcements is an increasing function of both the magnitude of the associated price reaction and the level of predisclosure information asymmetry among investors. In doing so, we utilize the fraction of institutional holdings of a firm's shares, in addition to the dispersion of analysts' earnings forecasts commonly used in the literature (e.g., Atiase and Bamber 1994), for testing the role of predisclosure information asymmetry. We find that the trading volume reaction to quarterly earnings announcements is significantly and positively related to predisclosure information asymmetry even after the associated price reaction and the dispersion of analysts' earnings forecasts are controlled for. Our findings suggest that the institutional holding variable better captures Kim and Verrecchia's predisclosure information asymmetry than the dispersion of analysts' earnings forecasts. © 1998, Copyright Taylor & Francis Group, LLC.

Original language	English
Pages (from-to)	267-284
Journal	Asia-Pacific Journal of Accounting
Volume	5
Issue number	2
DOIs	https://doi.org/10.1080/10293574.1998.10510544
Publication status	Published - 1998
Externally published	Yes

Bibliographical note

Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

Funding

The first author acknowledges partial financial support from Deloitte & Touche/CAAA Research Program and The Hong Kong Polytechnic University CRG grant (Grant#: G-S292). The last two authors acknowledge financial support from the Social Sciences and Humanities Research Council of Canada. We are grateful to 1/B/E/S Inc. for providing earnings forecast data.

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abstract = "The paper empirically investigates Kim and Verrecchia's (1991) theoretical proposition that trading volume reaction to public announcements is an increasing function of both the magnitude of the associated price reaction and the level of predisclosure information asymmetry among investors. In doing so, we utilize the fraction of institutional holdings of a firm's shares, in addition to the dispersion of analysts' earnings forecasts commonly used in the literature (e.g., Atiase and Bamber 1994), for testing the role of predisclosure information asymmetry. We find that the trading volume reaction to quarterly earnings announcements is significantly and positively related to predisclosure information asymmetry even after the associated price reaction and the dispersion of analysts' earnings forecasts are controlled for. Our findings suggest that the institutional holding variable better captures Kim and Verrecchia's predisclosure information asymmetry than the dispersion of analysts' earnings forecasts. {\textcopyright} 1998, Copyright Taylor \& Francis Group, LLC.",

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AU - Kim, Jeong-Bon

AU - Krinsky, Itzhak

AU - Lee, Jason

N1 - Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

PY - 1998

Y1 - 1998

N2 - The paper empirically investigates Kim and Verrecchia's (1991) theoretical proposition that trading volume reaction to public announcements is an increasing function of both the magnitude of the associated price reaction and the level of predisclosure information asymmetry among investors. In doing so, we utilize the fraction of institutional holdings of a firm's shares, in addition to the dispersion of analysts' earnings forecasts commonly used in the literature (e.g., Atiase and Bamber 1994), for testing the role of predisclosure information asymmetry. We find that the trading volume reaction to quarterly earnings announcements is significantly and positively related to predisclosure information asymmetry even after the associated price reaction and the dispersion of analysts' earnings forecasts are controlled for. Our findings suggest that the institutional holding variable better captures Kim and Verrecchia's predisclosure information asymmetry than the dispersion of analysts' earnings forecasts. © 1998, Copyright Taylor & Francis Group, LLC.

AB - The paper empirically investigates Kim and Verrecchia's (1991) theoretical proposition that trading volume reaction to public announcements is an increasing function of both the magnitude of the associated price reaction and the level of predisclosure information asymmetry among investors. In doing so, we utilize the fraction of institutional holdings of a firm's shares, in addition to the dispersion of analysts' earnings forecasts commonly used in the literature (e.g., Atiase and Bamber 1994), for testing the role of predisclosure information asymmetry. We find that the trading volume reaction to quarterly earnings announcements is significantly and positively related to predisclosure information asymmetry even after the associated price reaction and the dispersion of analysts' earnings forecasts are controlled for. Our findings suggest that the institutional holding variable better captures Kim and Verrecchia's predisclosure information asymmetry than the dispersion of analysts' earnings forecasts. © 1998, Copyright Taylor & Francis Group, LLC.

UR - https://www.scopus.com/pages/publications/85148014524

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U2 - 10.1080/10293574.1998.10510544

DO - 10.1080/10293574.1998.10510544

M3 - RGC 21 - Publication in refereed journal

SN - 1029-3574

VL - 5

SP - 267

EP - 284

JO - Asia-Pacific Journal of Accounting

JF - Asia-Pacific Journal of Accounting

IS - 2

ER -

Price and Volume Reactions to Quarterly Earnings Announcements and Predisclosure Information Asymmetry

Abstract

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