Too Good to Be True? An Analysis of the Options Market's Reactions to Earnings Releases

2011 ◽  
Author(s):  
Sugata Ray
Keyword(s):  
Earnings Releases

News at the Bell and a Level Playing Field

2022 ◽  
Author(s):  
Danqi Hu ◽  
Andrew Stephan
Keyword(s):  
Stock Exchange ◽  
Institutional Ownership ◽  
Informed Trading ◽  
Stock Exchanges ◽  
Level Playing Field ◽  
Playing Field ◽  
Earnings Releases ◽  
Do So

We provide initial evidence that stock exchange procedures around closing auctions advantage speed traders at the expense of auction participants. We show that, on Nasdaq and NYSE Arca, 4:00 pm earnings releases result in informed trading in the continuous regular-hour session in the short window between 4:00 pm and the closing auction; this trading subsequently moves closing prices in the direction of the earnings news. The ability of speed traders to submit 4:00 pm-news orders to the auction through the continuous session earns them up to 1.5% profit and creates an unlevel playing field because most auction participants are not allowed to cancel their orders. When stock exchanges recommended that firms delay disclosures until after the market close, those with higher institutional ownership were more likely to do so voluntarily. Our study has implications regarding the timing of information releases and the design of the closing process.

Bringing order to non-GAAP financial measures: SEC sues to enforce “equal-or-greater-prominence” requirement

2019 ◽  
Vol 20 (4) ◽  
pp. 51-57
Author(s):  
Richard J. Parrino
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Financial Measures ◽  
Generally Accepted Accounting Principles ◽  
Enforcement Action ◽  
Accounting Principles ◽  
Depth Analysis ◽  
The Us ◽  
Earnings Releases

Purpose This article examines the first action by the US Securities and Exchange Commission to enforce the “equal-or-greater-prominence” requirement of its rules governing the presentation by SEC-reporting companies, in their SEC filings and earnings releases, of financial measures not prepared in accordance with generally accepted accounting principles (GAAP). Design/methodology/approach This article provides an in-depth analysis of the equal-or-greater-prominence rule and the SEC’s enforcement posture in the context of the SEC’s concern that some companies present non-GAAP financial measures in a manner that inappropriately gives the non-GAAP measures greater authority than the comparable GAAP financial measures. Findings Although the appropriate use of non-GAAP financial measures can enhance investor understanding of a company’s business and operating results, investors could be misled about the company’s GAAP results by disclosures that unduly highlight non-GAAP measures. The SEC’s enforcement action signals a focus on the manner in which companies present non-GAAP financial measures as well as on how they calculate the measures. Originality/value This article provides expert guidance on a major SEC disclosure requirement from an experienced securities lawyer.

scholarly journals The framing and reframing of corporate financial results

2016 ◽  
Vol 21 (1) ◽  
pp. 103-119 ◽  
Author(s):  
Julian Rosenkranz ◽  
Irene Pollach
Keyword(s):  
Press Releases ◽  
Content Type ◽  
Financial News ◽  
Financial Communication ◽  
News Agencies ◽  
Corporate Earnings ◽  
Positive Statements ◽  
Earnings Releases ◽  
Earnings Press Releases

Purpose – News agencies are important stakeholders for large organizations, since the news they distribute will be adopted by other news outlets, which influence public opinion and hence corporate reputation. The purpose of this paper is to advance the understanding of how corporate earnings press releases are transformed into financial news by investigating whether the frames introduced by companies are adopted or reframed by news agencies. Design/methodology/approach – A content analysis of framing techniques in corporate earnings releases and their corresponding news-agency releases was performed, focussing on the financial figures and benchmarks presented, performance attributions, and the tonality of the texts. Findings – The findings suggest that news agencies reframe earnings releases at the textual-pragmatic level by reducing their length, using fewer financial figures, and changing the position of these figures in the texts; they increase transparency by avoiding adjusted financial figures, qualifying figures, and adding analyst assessments; and they change the tonality by down-toning positive statements and highlighting negative aspects. Originality/value – This paper makes a contribution to the field of corporate financial communication, which has not shed much light on the transformation of earnings press releases into financial news. In addition, this paper contributes to the stream of research on journalistic transformations of corporate press releases in general, which has ignored the influential role of news agencies as both manufacturers and wholesalers of news.

Firm characteristics associated with concurrent disclosure of GAAP-compliant financial statements with earnings announcements

2018 ◽  
Vol 26 (3) ◽  
pp. 365-381 ◽  
Author(s):  
Thomas D’Angelo ◽  
Samir El-Gazzar ◽  
Rudolph A. Jacob
Keyword(s):  
Financial Reporting ◽  
Voluntary Disclosure ◽  
Earnings Announcements ◽  
Balance Sheet ◽  
Control Sample ◽  
Financial Statements ◽  
Cash Flows ◽  
Content Type ◽  
Quarterly Earnings ◽  
Earnings Releases

Purpose This paper aims to examine the characteristics of firms that voluntary disclose generally accepted accounting principals (GAAP)-compliant statements of income, statement of cash flows (SCF) and balance sheet (BS) concurrently with quarterly earnings releases. Cardinal motivation of the paper stems from the increasing demand over the past decade by professional analysts and the Securities and Exchange Commission for concurrent disclosure of GAAP-compliant financial statements with earnings’ announcements. Design/methodology/approach Using hand-collected archival data, a random sample was identified as disclosing GAAP-compliant SCF and BS with their quarterly earnings releases compared to a control sample identified as non-GAAP-compliant disclosing firms during the 36-month period of 2009-2011, and several hypotheses are tested to determine managements’ incentives to disclose GAAP-compliant versus non-GAAP financials with their earnings releases. Findings The results in this paper suggest that debt financing, corporate governance, operating performance, earnings volatility, industry membership (such as technology and more research and development-intensive) and complexity of operations (number of segments) are significant characteristics of firms electing to concurrently disclose GAAP-compliant SCF and BS with earnings releases. Practical implications The findings discussed in this paper are of special interest to financial reporting policymakers, financial analysts, firm managers and stakeholders and academics. Originality/value The voluntary disclosure literature on quarterly earnings releases is extended by differentiating between GAAP-compliant and non-GAAP-compliant voluntary disclosers. The specific findings of this study may provide valuable input to policymakers as they study prevailing voluntary disclosure rules and practices.

Voluntary Disclosure of Disaggregated Balance Sheet and Cash Flow Information Around Restatements

2021 ◽  
Author(s):  
Kai Chen ◽  
Darren Henderson ◽  
Christine I Wiedman
Keyword(s):  
Cash Flow ◽  
Voluntary Disclosure ◽  
Balance Sheet ◽  
Reporting Quality ◽  
Information Uncertainty ◽  
Earnings Response Coefficients ◽  
Earnings Response ◽  
Earnings Releases ◽  
Flow Information ◽  
The Impact

We examine changes in voluntary disclosure of balance sheet and cash flow (BS/CF) information in earnings releases after restatement announcements. We consider these disclosures to be particularly relevant in the restatement context since they help investors interpret accruals and assess reporting quality at a time when information uncertainty is high. We find that BS/CF disclosures drop significantly for at least five quarters following restatement announcements, particularly for severe restatements and those restatements more likely to lead to litigation, and less for firms likely to benefit from reputation-repairing activities. We next consider the impact of BS/CF changes on earnings informativeness and find significantly lower post-restatement earnings response coefficients for firms ceasing BS/CF disclosure, but not otherwise. Overall, we argue that litigation concerns provide a strong disincentive for disclosure following restatement announcements. Our findings add to a growing literature on the importance of disaggregated BS/CF information in interpreting accruals.

The Effect of First Wave Mandatory XBRL Reporting across the Financial Information Environment

2012 ◽  
Vol 26 (1) ◽  
pp. 127-153 ◽  
Author(s):  
Joung W. Kim ◽  
Jee-Hae Lim ◽  
Won Gyun No
Keyword(s):  
Stock Returns ◽  
The Body ◽  
Information Environment ◽  
Financial Information ◽  
Data Availability ◽  
Market Condition ◽  
Matched Pair ◽  
Uncertain Information ◽  
Information Risk ◽  
Earnings Releases

ABSTRACT This study examines the effect of mandatory XBRL disclosure across various aspects of the financial information environment. Our findings show an increase in information efficiency, a decrease in event return volatility, and a reduction of change in stock returns volatility for 428 firms (1,536 10-K and 10-Q filings) post-XBRL disclosure. In addition, this study shows that XBRL mitigates information risk in the market, especially when there is increased uncertainty in the information environment. Our results are robust to various alternative specifications and research modifications, such as a matched-pair control (326 XBRL versus 326 non-XBRL firms), current stock market condition, potential earnings releases, and corporate governance. This study contributes to the literature by systematically documenting evidence of how mandatory XBRL disclosure decreases information risk and information asymmetry in both general and uncertain information environments. Our evidence could potentially assist the SEC in their effort to expeditiously assess the benefits of XBRL. Data Availability: The list of firms used in the study is available from Professor Lim upon request. All other data are available from sources identified in the body of the paper.

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