Abstract
This paper examines market responses at different times of annual earnings announcements in Taiwan. Since accounting information is available on the Internet at almost no cost, we argue that there is still a cost of limited attention to investors. The empirical results show that the unexpected return changes at the outset of the earnings announcements season are insignificant. As the filings of annual reports intensify, investors become attentive to the massive earnings news and trade accordingly with an increase in unexpected return changes, culminating at the end of the earnings announcement season. We find a significant decrease in trading volume for good news and bad news announced after the statutory due date, which does not necessarily imply investor inattention since a consensus in the market decreases trading volume. We end by examining the trading activity of different types of investors during the earnings filing period. Overall, our findings suggest that the attention allocation by investors is not homogeneous during annual earnings announcements and support the hypothesis of limited attention.
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