Market reaction to regulatory policy changes in financial statements filings: evidence from Turkey

Abstract

Financial reporting has a vital impact on investors for acquiring and integrating value-relevant information in making or revising investment decisions. This article investigates how changes in regulatory disclosure policy for financial reporting influence market reaction for the companies listed on Borsa Istanbul over the period 2003–2017. We elaborate our findings in the context of investor attention and trading opportunities, resulting in three distinct policies. The results reveal that small-cap firms are more exposed to abnormalities than large-cap firms for positive news before and after the public disclosure platform (PDP). Further, the number of financial statements filings made on the same day affects the abnormal returns before the PDP (from 2003 to June 2009) and, after the PDP (from 2009 to 2013), where the companies are allowed to release them intra-day. Additionally, the response of investors to financial statements filings on Friday is quite different than other days of the week before the PDP and after the PDP (from 2013 to 2017), where the companies are required to make their release only after the market closure. Finally, as a search-facilitating technology, the adaptation of eXtensible Business Reporting Language (XBRL) does not translate into an improvement on market reaction. These findings support the validation of limited investor attention and post-announcement drift in the Turkish capital market.