Does Financial Statement Comparability Mitigate Delayed Trading Volume Before Earnings Announcements?

• In Event: Capital Markets Research III

Abstract

This paper examines the role of financial statement comparability in shaping trading volume prior to earnings announcements. We find that the degree of delayed trading volume prior to earnings announcements is less pronounced for firms with more comparable financial statements. In addition, the effect of financial statement comparability on pre-announcement trading volume is stronger in more opaque information environments. We also find that the positive association between comparability and trading volume is observed only during the pre-earnings announcement period but neither during the on- nor post-earnings announcement period. Overall, this paper provides new, volume-based evidence that financial statement comparability serves an integral mechanism resolving information asymmetry in the firm's pre-existing information environments.

Authors

• Junwoo Kim, University of Massachusetts-Boston

• Robert Kim, University of Massachusetts-Boston

• Sangwan Kim, University of Massachusetts-Boston