Firm Complexity and Post-Earnings-Announcement Drift

• In Event: Auditing and financial accounting: Skepticism and Forecasting
  In Dialogue Session: Auditing and Financial Accounting: Skepticism and Forecasting

Abstract

The paper shows that the post earnings announcement drift (PEAD) is stronger for conglomerates, despite conglomerates being larger, more liquid, and more actively researched by investors. We attribute this finding to slower information processing about complex firms and show that PEAD is positively related to measures of firm complexity. We also show that PEAD is stronger for new conglomerates than it is for existing conglomerates. Finally, we find that conglomerates are followed by a fewer number of analysts compared to single-segment firms of similar size and that these analysts are more likely to be non-specialists and make larger forecast errors.

Authors

• Alexander Barinov, University of Georgia

• Shawn Park, University of Georgia

• Celim Yildizhan, University of Georgia