An Empirical Investigation of the Effect of Quarterly Earnings Announcement Timing on Stock Returns

Abstract

This research examines both the association between quarterly announcement timing (early or late) and the type of news (good or bad) reported, and the relationship between stock returns and timing around the earnings announcement date. Recent research on announcement timing (Givoly and Palmon [1982], Patell and Wolfson [1982], Kross [1981], and Whittred [1980]) has provided evidence that delayed announcements of annual earnings more often convey bad news (i.e., lower than expected earnings) than do early announcements. However, we know of no study which has reported evidence of the same phenomenon for quarterly earnings. Furthermore, there is a limited amount of evidence regarding the reaction of market participants to announcement timing. While three studies (Givoly and Palmon [1982], Kross [1982], and Chambers and Penman [1984]) find that early (late) announcements are associated with higher (lower) abnormal returns or high (low) stock return variability, relative to late (early) announcments, only Kross [1982] controlled for the sign of the earnings forecast error and none controlled for the magnitude of the earnings forecast error. It is well accepted that stock returns are associated with the sign of the earnings forecast error (EFE). Since announcement timing is also