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Annual earnings announcements and market reaction: The case of a small capital market

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    Final published version, 55.2 KB, PDF document

  • Helle Langhoff Lønroth, Denmark
  • Peder Fredslund Møller, Denmark
  • Frank Thinggaard
  • Accounting Research Centre - ARC
  • Department of Business Studies
  • Department of Management
A rich body of evidence exists on the relationship between security returns and corporate annual earnings announcements for countries with highly active capital markets. This paper presents some recent findings for a capital market at the other end of the scale: the small Danish stock market. Our results are based on the events study methodology, using the market model to calculate abnormal returns. In the first part of the paper we find that the Danish stock market extracts most of the information content of the earnings release on the announcement date and the day after. Significant average abnormal price changes can be found, however, two and three days after the announcement day. In the second part of the paper we identify the market´s expectations of earnings. This is done by comparing actual price changes with predictions of price changes based on various expectation models. Our findings suggest that only a model based on reported IBES-estimates of earnings per share shortly before earnings release is descriptive of the market´s expectations. Some of these findings contradict the results in the only published 17 year old Danish event study on annual earnings announcements and they indicate that the Danish capital market has become more efficient and sophisticated during the last two decades.
Original languageEnglish
Publication year1999
Number of pages16
Publication statusPublished - 1999
EventEIASM Symposium on Market Based Accounting Research With Focus on Valuation, Risk and Financial Statement Analysis, November -
Duration: 18 Dec 2010 → …


ConferenceEIASM Symposium on Market Based Accounting Research With Focus on Valuation, Risk and Financial Statement Analysis, November
Period18/12/2010 → …

    Research areas

  • Events study, Annual earnings announcements, Market reactions, Abnormal returns, Expectation models, IBES estimates, Danish stock market, Efficient, HHÅ forskning

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