The Information Content of Earnings Announcements: New Insights from Intertemporal and Cross-Sectional Behavior

The Information Content of Earnings Announcements: New Insights from Intertemporal and Cross-Sectional Behavior

March 14,2015Working Paper No. 3338

This study examines the information content of quarterly earnings announcements. We first use a nonparametric approach to investigate whether quarterly earnings announcements are informative between 1971 and 2011 and find unequivocal evidence that earnings announcements convey significantly more information relative to non-announcement periods. We also find that the information content increases over time with a dramatic increase from 2001 onward, a period that includes the implementation of Sarbanes Oxley reforms and the worst economic downturn since the Great Depression. We then investigate cross-sectional variation in information content. We find that the information content of earnings announcements is positively associated with profitability, firm size and analyst coverage.