An Empirical Study on the Announcement of Corporate Quarterly Results in India

Abstract

Announcement of quarterly results is the course of communicating the performance of a company to its owners. Investors’ long-term buying decisions are largely based on the earnings stream of the firm. In order to show the progress of the company, the earnings position is revealed as per the listing agreement at a regular interval. Normally a higher earnings than the previous quarter earnings should be welcomed by the market. This should be associated with greater return after the result is announced. All higher return after the announcement cannot say to be due to the earnings results. To find out the impact of results on returns, the impact of other factors in returns is to be segregated. The impact of other factors in return is taken from the index which is nothing but the market return. The announcement of earnings is unique and specific to a company, to study its impact on the market place, the impact of other factors is removed, that is why the period is limited to 32 days and the return is calculated for 31 days. This study examines abnormal returns of earnings announcement during the pre-announcement and post announcement period. This study is based on samples of 50 Nifty companies listed on National Stock Exchange, exhibited that investors do not gain value from earnings announcement. Indeed shareholders earned little value over a period of 15 days prior to the earnings announcement through to 15 days after the announcement. The lower return may be partially compensated because of the current earnings yield. This study also indicates that announcement of result does not convey any useful information to the investing community, which needs to be further investigated.