Abstract
The implementation of the new revenue recognition standard (ASC 606) has significantly changed the impact of earnings announcements on various measures of market quality and trading activities. In contrast to prior research findings, we show that earning announcements are accompanied by a decrease in the bid-ask spread, the price impact of trades, informed trading, and pricing efficiency, and an increase in the quoted depth after the implementation of ASC 606. These results indicate that ASC 606 has improved the informativeness of earnings and changed the effect of earnings announcements on the firm’s information and trading environments accordingly.
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