Voluntary Disclosures and Market Response to Earnings Announcements

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Abstract

In this paper, we examine the relation between voluntary disclosure throughout the year and investors’ belief revision at the time of the earnings announcements. We argue that voluntary disclosure is likely to increase differences in the process of information assimilation by investors and, thus, increase investor disagreement at the time of the earnings announcement. Using abnormal trading volume as a measure of investor disagreement we find evidence consistent with this hypothesis. We also argue that voluntary disclosures will be associated with earnings announcements of lower average informativeness and, using returns as our measure, find evidence consistent with this hypothesis.

Authors

• Guy D. Fernando, University at Albany - SUNY

• Justin Giboney, University at Albany - SUNY

• Richard A Schneible, University of Albany