Motelson, Kerry. 2009. A Cross-Time Study Of U.S. Earnings, Splits, And Dividends Data.
Doctoral Dissertation, Cornell University.
This paper details the share
price reaction to dividend, earnings, and stock split announcements over a
37-year period. It first considers whether there is differential information
content in similar corporate news announcements for different types of firms.
Second, it investigates whether the value of news information about these firms
has declined over time (addressing the question of whether news has become
"less newsworthy").
We go on to study the
relationship between stock price reactions to corporate news announcements and
characteristics of the firms. Operating under the assumption that news
announcements have an asymmetrical impact on stock price according to factors
like firm size, years of being publicly traded, or industry classification, we
categorize firms by whether their corporate news announcements will be more or
less valuable to the public. For example, since the public may know more about
larger firms, we expect the market to react less strongly (in absolute value)
to new information from large firms. We find strong support for this
hypothesis. We find little evidence that is consistent with the idea that
"news has become less newsworthy" over the past four decades.
However, although we do find that the share price reaction to "good"
dividend news has become less positive and to "bad" dividend news has
become less negative over time, no such related evidence exists for stock
splits and earnings announcements.
We also find an increase in
standard deviation of three day returns around earnings and splits
announcements over time, with noteworthy convergence amongst positive, negative
and neutral earnings announcements. Additional investigation of entire
distributions of returns using kernel density estimators also rejects the
"news is no longer newsworthy" idea.
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