Trading Volume Around Earnings Announcements and Other Financial Reports: Theory, Research Design, Empirical Evidence, and Directions for Future Research

The Impact of Accounting Disclosures and the Regulatory Environment on the Information Content of Earnings Announcements

“…Contrary to our abnormal return results, we find abnormal trading volume for good news announcements for A-shares in all three time periods. Taken together, the abnormal return and abnormal volume results suggest there may be information leakage preceding the earnings announcement, but investors have disparate interpretations of such information (e.g., Bamber et al, 2011;Beaver, 1968). for bad news announcements, an abnormal volume reaction for all share classes to good news announcements, and an abnormal volume reaction for most share classes to bad news announcements.…”

“…We find abnormal volume for both good news and bad news announcements in the post-transition time period. Finding evidence of a volume reaction suggests that investors had disparate beliefs prior to the earnings announcement (e.g., Bamber, Barron, & Stevens, 2011;Beaver, 1968).…”

“…All earnings announcements for A-shares, and good news announcements for B-shares, ORD-shares, and Other-shares generate abnormal volume, but not abnormal returns in the post-transition period. Prior research (e.g., Bamber et al, 2011) suggests that earnings announcements create abnormal volume but not abnormal returns when investors have differing interpretations of the information in the announcements. For example, some investors might expect earnings to be higher than the average analyst forecast, and therefore view the earnings announcement as "bad news" even though earnings were above the mean analyst forecast.…”

Discussion of “Security Returns and Volume Responses around International Financial Reporting Standards (IFRS) Earnings Announcements”

“…However, there are a number of variables that have been identified in prior research as potentially affecting both return volatility and trading volume volatility, including analyst following (Defond, Hung, $_amp_$amp;Trezevant, 2007), firm size (Bamber, Barron, $_amp_$amp;Stevens, 2011), forecast dispersion, industry membership, leverage, sign on earnings (Hayn, 1995), reporting lag (Defond et al, 2007), and time (Landsman $_amp_$amp;Maydew, 2002).…”

Quantifying differential interpretation of public information using financial analysts’ earnings forecasts

“…It is important to note that these constructs are distinct. On the one hand, information asymmetry may arise due to differential interpretation, as was implied by Bamber et al (2011). On the other, Bloomfield and Fischer (2011) suggest that a divergence of opinion may occur without an increased information asymmetry.…”