Pre-Holiday Corporate Announcement Effect In China

Autore et al.firstly studied market reaction of the pre-holiday corporation announcement effect on American Securities Market in 2015.In their research,they termed this phenomenon--the abnormally high announcement reaction occurred prior to holidays--as the "pre-holiday corporation announcement effect".Autore et al.analyzed several types of major corporate event announcements,including stock repurchases,seasoned equity offerings(SEOs)acquisitions,and quarterly earnings which were made immediately prior to or on holidays.Finally,they found that pre-holiday corporation announcement effect existed in American Securities Market,and the results were consistent with a mood-based explanation.However,in China,the development of our securities market has its own feature and the festival culture is also different.Under such market background,it is very important to study market reaction of the pre-holiday corporation announcement effect in China.In the paper,author mainly uses event study method to research market reaction of the pre-holiday corporation announcement effect.Based on the announcement data of non-financial listed A-share corporations from January 1st,2013 to December 31st,2015,the paper selects typical Chinese festivals,and builds dummy variable "Preholiday".Then author analyzes the differences between corporation announcements which are made during pre-holiday trading days and the ones during normal trading days.The results demonstrate that pre-holiday corporation announcement effect does exist in the stock market and the cumulative abnormal returns of corporation announcement during pre-holiday trading days are significantly negative.After the classification of the announcement,the favorable announcements are also significantly negative.However,the unfavorable announcement was not significant.For robustness,author takes the current abnormal returns instead of two days of the cumulative ones as the interpreted variable to ensure that the event window does not extend to the date at the end of the holidays during research.The findings reapprove that the pre-holiday corporation announcement effect really exists in the stock market.Besides,from behavioral finance perspective,author uses investor attention andinvestor sentiment as two factors to analyze the potential causes.The result shows that the investor attention has no visible influence on the pre-holiday corporation announcement effect,so investor attention is not the reason for the pre-holiday corporation announcement effect.However,on the contrary,investor sentiment shows significant influence on the pre-holiday corporation announcement effect,that is,investor sentiment has a negative impact on the pre-holiday corporation announcement.Investors are not optimistic about corporate announcements on pre-holiday trading days compared to ordinary trading days.As a result,we come to the conclusion that investor sentiment is the reason for pre-holiday corporation announcement effect.During other researches regarding the pre-holiday corporation announcement effect,we have some other findings including:(i)There exists a phenomenon of overreaction in the securities market:the pre-holiday corporation announcement effect appears within one week after the significant positive reversal,however,two weeks later,the performance become not obvious.This phenomenon proves that the market is not efficient;(ii)Taking the "week effect" into consideration,we control the effect of Monday and Friday to test again.We find that the pre-holiday corporation announcement effect still exist in the stock market;(ⅲ)After building the dummy variable "Post-holiday",we find that the post-holiday corporation announcement effect does not exist in the stock market.To conclude,this paper analyzes the market reaction of the pre-holiday corporation announcement effect,provides empirical evidence for future research.It is the first time to put forward the idea that the pre-holiday corporation announcement effect really exists in Chinese stock market.