PRICE-GENERATING CHARACTER OF INFORMATIONS ABOUT NET FINANCIAL RESULT IN THE CASE OF WARSAW STOCK EXCHANGE

Abstract

For most governments in the world, a fundamentally strong economy is the goal of their politics. One of the determiners of such economy is operating and developed capital market. This process, however, entails the necessity of its effectiveness. In relation to the capital market, the effectiveness may be defined in three dimensions [Sharpe, 1992]. One of them is the so-called information efficiency. The first man who drew attention on the possibility of occurrence informatively effective capital market was L. Bachelier [1900]. In his study he included a theory of price formation on the French stock exchange. However, its first actual definition has been put forward much later by E. Fama [1965]. According to it, on efficient capital market “prices always fully reflect all available information”.There is a number of information that may impact on the prices of financial instruments. These include: news of profit sharing (dividend payments), stock exchange analysts' recommendations, transactions made by insiders, split or resplit shares and information not necessarily related to particular company or an economic sector. Moreover, this information may be evidences derived from accounting. Data from the accounting system has a very significant impact related to the prices of companies listed on global stock exchanges. They enable the investors’ risk on the capital market. Concerning to that, they can improve the selection of entities characterized by a good economic and financial situation. Placing funds in these can mean that investors will achieve above-average profits in the future.One of the most important data coming from the accounting system is the information about companies net financial result (net profit or loss). Informing market participants about the net financial result may affect the price volatility of the issuer's financial instruments. It was already written about in current of the capital market research in accounting in the 1960s [Ball, Brown, 1968].Main aim of this paper was examination the impact of announcement information about net financial result on the market value the biggest companies listed on the Warsaw Stock Exchange grouped in the WIG20 index. To achieve this aim have used the event study methodology-one of the methods of measuring information efficiency of the capital market [Fama, 1969]. It is a research instrument used to assess investors’ reactions, while on the other hand it can be used as an element of financial market efficiency evaluation. For this purpose constructed 5-day long event window (where t0 was a day of announcement the financial report). Using the event study methodology, were calculated the abnormal returns for each quarterly report publications between 2016 and mid-2018 for each company in WIG20 index. Results of this paper are given below.