Journal of Financial and Quantitative Analysis

Research Articles

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

Christine X. Jianga1, Tanakorn Likitapiwata3 and Thomas H. McInisha2

a1 cjiang@memphis.edu

a2 tmcinish@memphis.edu, Fogelman College of Business and Economics, University of Memphis, Memphis, TN 38152

a3 tanakorn.l@chula.ac.th, Faculty of Commerce and Accountancy, Chulalongkorn University, Bangkok, Thailand

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.

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