Research On Market Response To The Annual Earnings Announcement

The purpose of the financial report is to offer the information correlated withdecisions to information users. The annual reports are the most important informationsource, which earnings information is the most interested information for the investors.Whether the financial accounting information is useful for information users to makedecision, which has always been one of the key issues of the finance research field.This dissertation has examined information content of annual reports and its usage tothe Security market through investigating change of price and trading volume aroundannual earning announcements, and then given the policy suggestions according to thereality of the security market of our country. The aim is to promote the securitymarket to become more open,rational,efficient.Empirical results show(:1)there is significant relation between information typesof annual reports and its reported date, the company with good earnings inclines toannounce its report earlier, on the contrary the company with bad earnings postponesannouncing its report. From the result we can find annual earnings reported dateaffects the earnings quality, the more quickly earnings discloses, the greater marketresponses.(2)In Shang Hai A-share market, we find that there is significant relationbetween unexpected earnings and abnormal returns. It shows there is significantinformation content in the earnings information. And the empirical study proves thatour stock market is not semi-strong efficient because investors can gain abnormalreturns by designing portfolio. Besides, we also discover investors' reaction toNon-Blue Chip stocks more strongly than Blue Chip stocks regardless of good newsor bad news.(3)The trading volume will increase notably when the companyannounces the annual report. The reaction that lasts nearly two weeks shows existobvious indication effect and post-announcement effect. In addition, the larger theunexpected earning is, the larger and the more continual abnormal trade volume is;and the company is smaller in scale,the result is the same.