Research On The Post-Earnings Announcement Drift In Chinese A Share Market

Traditional finance says markets are efficient,however,with the continuous improvement of financial markets and the development of information technology,more and more evidence shows that the non-efficiency of real financial markets is becoming more apparent.One important phenomenon challenging the efficient market hypothesis is the occurrence of price drift after earnings announcements,which has attracted much attention in the market since Ball and Brown first proposed it in 1968.Although many domestic and foreign scholars have conducted extensive research on this phenomenon,China’s capital market started relatively late and is not yet fully developed.Therefore,research on this phenomenon is not deep enough,and the research conclusions are different,which has caused domestic investors to hesitate when facing earnings announcement information.This study examines the existence of price drift after earnings announcements in China’s A-share market and analyzes its related influencing factors,providing a theoretical and empirical basis for future research.The results of this study can effectively guide Chinese investors to make correct decisions when facing earnings announcements,engage in rational operations,and participate in the stock market more effectively to obtain more investment returns.This article conducts an empirical analysis of the phenomenon of stock price drift after earnings announcements and its related influencing factors using daily trading data for 3986 listed companies in China’s A-share market for the period from 2012 to 2021,over a period of 5,20,and 30 trading days after the announcement.To obtain the best analysis results,the mixed OLS model,individual fixed effects model,and individual random effects model were compared,and the mixed OLS model and weighted least squares regression were ultimately chosen as the analytical tools.The research results show that there is a significant positive correlation between unexpected earnings and cumulative abnormal returns over the 5,20,and 30 trading days after earnings announcements,indicating the existence of stock price drift in China’s A-share market.Furthermore,the influence of company growth,market conditions,institutional investor shareholding,and the industry sector in which the listed company operates on the stock price drift after earnings announcements was considered.The research found a significant positive correlation between the company’s book-to-market ratio and cumulative returns after earnings announcements.The better the market conditions,the more significant the stock price drift after earnings announcements.The higher the shareholding proportion of institutional investors,the less significant the stock price drift after earnings announcements.In addition,the industry sector to which the listed company belongs also has an impact on the stock price drift after earnings announcements,with the stock price drift after earnings announcements for stocks listed on the Growth Enterprise Market(GEM)and the Science and Technology Innovation Board(STAR Market)being more significant than those listed on the main board.Based on the research conclusions of this paper,the following suggestions are put forward:For the regulatory authorities and listed companies,they need to work together to improve the quality and reliability of financial information disclosure,and the regulatory authorities should also supervise the time of earnings information disclosure.For investors,when making investment decisions,they should not rely solely on expected earnings,but should conduct comprehensive and in-depth analysis and consideration of various factors in order to more accurately assess the investment value of the company and make investment decisions that are in line with their own interests and risk tolerance.