Abstract
This paper analyses the effects of financial statements on the efficiency of the Russian stock market. Specifically, we analyse the impact of financial reporting on stock prices of the firms listed on the Moscow Stock Exchange. By means of the widely used event study method, which dates back to Ball and Brown [1], we analyse how corporate news publication affects stock prices.
 Our research analyses 1000 samples, each consisting of 30 events, independent of the underlying stocks/firms and analyses the relation between the behaviour of the share prices and the release of the firms’ annual, quarterly, and unscheduled financial statements. We use the daily stock price data of 56 components of the Russia Trading System Index from the years 2014 to 2020 in order to analyse the relation between the behaviour of the shares’ prices and the releases of the firms’ annual, quarterly, and unscheduled financial statements.
 Using an ordinary least squares market model, we estimate the market parameters and especially the so-called normal returns, i.e. benchmark values. With this, we calculate the abnormal returns, i.e. the price changes caused by the events cf. [1; 2]. We perform several statistical tests for non-Gaussian distribution of these abnormal returns and find that there is a significantly non-Gaussian relationship between the publication of financial statements and the prices of the shares, which should not be the case in an efficient market [2].
 Our results indicate that stock price volatility on the publication of financial statements may be caused by some information asymmetry, and demonstrate that the Russian stock market responds significantly to new information. Thus, we discuss recommendations to improve the information content of financial statements in Russia. This means analysts and fund managers can use new information to predict future stock returns and, thus, construct profitable portfolios.
Highlights
A vibrant capital market attracts foreign capital and provides access to capital for firms seeking to raise funds
Our results indicate that stock price volatility on the publication of financial statements may be caused by some information asymmetry, and demonstrate that the Russian stock market responds significantly to new information
This study examines the behaviour of stock prices around the release of annual, quarterly, and unscheduled financial statements for companies listed in the Moscow Stock Exchange, and more precisely the ones in the Russian Trading System Index (RTS Index)
Summary
A vibrant capital market attracts foreign capital and provides access to capital for firms seeking to raise funds. Various reforms have been undertaken in the financial sector, including the partial adoption of international financial reporting standards (IFRS) in 2012 and a continuous review of the Russian Accounting Standards (RAS) These steps have been taken to increase market efficiency, attract investors, and steer growth in the Russian financial sector. The Moscow Exchange is relatively young compared to other major stock markets such as the NYSE, which was established in 1792, the London Stock Exchange, which was established in 1773, or Tokyo Stock Exchange established in 1878 This is because Russia started the transition from a command economy to a market economy in the 1990s. The capital structure of some Russian firms contains very few free-floating shares that can be traded in the market. It is of interest to investigate the efficiency of the Russian financial market under these unique circumstances
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
