Earnings Announcement And Price Drift

Capital market is important to the government and enterprises for financing. It is core of the system of the market and can improve the allocative efficiency of resources. In the capital market, accounting information is the bridge to the listed-company and investors. As the most significant accounting information, earnings has aroused and cultivated the scholars’interest, especially in the aspect of the relationship between earnings and the capital market.Institutional investors are characteristic of profession, standardization and diversity. They have great advantage in gathering information. Furthermore, they can analyze the information and make decisions with professional knowledge. To develop the institutional investors is to guide the investment actions in the market. So that it can reduce the instability and make the market grow in a stable way. Meanwhile, with the incomplete of the market system, the guardian and the scholars are beginning to pay attention to the actual effect of the institutional investors in the capital market.The paper researches on the before and post earnings announcement drift in the range of all listed companies stocks to certify the information of accounting earnings. For further research on the role of institutional investors, the paper chose the stocks holding by institutional investors. Then, the paper grouped the stocks according to the percentage of holding. In the guideline of event approach, the paper chose several different periods and analyzed the institutional investors’influence the on the drift. Finally, the paper concluded as follows.At first, as for the earnings announcement drift, it does exist in our capital market. And the drift of bad news and good news is asymmetric. That means, during the period of earnings announcement, the drift goes up in the bad news and goes down in the bad news.Then, as for the analysis of the institutional investors, the paper concluded that the more of the shares holding, the more of the drift before the earnings announcement. It demonstrated that institutional investors have information advantage and they can gain more returns by this. Especially in the good news, this kind of advantage makes no information after the earnings announcement.Moreover, after the earnings announcement, institutional investors have no effect on the drift in good news. But in the bad news, the more of the institutional investors are holding, the more of the drift before the earnings announcement. Despite of it, the low holding of institutional investors make the drift go down, the high holding of institutional investors make the drift go up, and so the institutional investors" drift is meaningful to the stability of the market in this way.Last but not the least, the paper got that earnings were little influenced the stock price. We should not expect only the earnings can explain the abnormal returns. We should realize the existence of other factors. While the low correlation between them carries out the signal that we should improve the usefulness of accounting information.