Market use of disclosure components in interim reports

: Kanto AJ, Schadewitz HJ

Publisher: PERGAMON-ELSEVIER SCIENCE LTD

: 2000

: Omega

: OMEGA-INTERNATIONAL JOURNAL OF MANAGEMENT SCIENCE

: OMEGA-INT J MANAGE S

: 28

: 4

: 417

: 431

: 15

: 0305-0483

DOI: https://doi.org/10.1016/S0305-0483(99)00071-7(external)

The degree of unexpected disclosure in interim reports affects the communication of earnings information to the market. This finding is built upon here by investigating whether individual components of disclosure, rather than the overall disclosure, are made use of. The data comprise information disclosed in interim reports submitted to the Helsinki Stock Exchange (HSE) in the period 1985-93. Four different disclosure components are investigated. The major finding is that reported earnings have an immediate effect after the event. In addition, there is a delayed response to earnings when the quality of the financial analysis is high. This shows that analytical disclosure enhances and reinforces the usefulness of the earnings information to the market. Specifically, when the financial analysis section of a report is comprehensive, it has, conjointly with earnings, a strong effect on returns for as long as 7 days after the event. (C) 2000 Elsevier Science Ltd. All rights reserved.