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Voluntary Disclosures in Earnings Announcements and Coincident Market Reactions
Orie Barron, Penn State University
Donal Byard, Baruch College -- CUNY
Yong Yu, University of Texas at Austin
ABSTRACT. This study examines the relation between supplemental voluntary disclosures in firms’ earnings announcements and the market reactions to these announcements. We find that the magnitude of trading volume reactions around earnings announcements is associated with the disclosure of balance sheet information, segment reporting data, and range management forecasts, and the length of conference calls. We show that this finding is explained by the relation between these voluntary disclosures and measures of belief revision and disagreement among analysts. In contrast to this trading volume evidence, we find that only balance sheet disclosures are associated with price reactions to earnings announcements. Consistent with the results for these measures of disagreement, we show that earnings announcements where volume reactions are high relative to price reactions are associated with the disclosure of segment data, management range forecasts of future earnings, and longer conference calls.
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