An Empirical Study on the Announcement of Corporate Quarterly Results in India

Abstract

<p>Announcement of quarterly results is the course of communicating the performance of a company to its<br />owners. Investors’ long-term buying decisions are largely based on the earnings stream of the firm. In<br />order to show the progress of the company, the earnings position is revealed as per the listing<br />agreement at a regular interval. Normally a higher earnings than the previous quarter earnings should<br />be welcomed by the market. This should be associated with greater return after the result is announced.<br />All higher return after the announcement cannot say to be due to the earnings results. To find out the<br />impact of results on returns, the impact of other factors in returns is to be segregated. The impact of<br />other factors in return is taken from the index which is nothing but the market return. The<br />announcement of earnings is unique and specific to a company, to study its impact on the market place,<br />the impact of other factors is removed, that is why the period is limited to 32 days and the return is<br />calculated for 31 days. This study examines abnormal returns of earnings announcement during the<br />pre-announcement and post announcement period. This study is based on samples of 50 Nifty<br />companies listed on National Stock Exchange, exhibited that investors do not gain value from earnings<br />announcement. Indeed shareholders earned little value over a period of 15 days prior to the earnings<br />announcement through to 15 days after the announcement. The lower return may be partially<br />compensated because of the current earnings yield. This study also indicates that announcement of<br />result does not convey any useful information to the investing community, which needs to be further<br />investigated.</p>