An Analysis of the Impact of Varying Levels of Interim Disclosure on Finnish Share Prices within Five Days of the Announcement

Schadewitz, Hannu J.; Kanto, Antii J.; Kahra, Hannu; Blevins, Dallas R.
June 2002
American Business Review;Jun2002, Vol. 20 Issue 2, p33
Academic Journal
This study compares a controlled earnings/price relationship existing in three regimes of voluntary interim disclosure. The existence of differences among the three levels of disclosure indicates the importance of interim reporting. Specifically, this study discovers that investors in the Helsinki Exchanges (HEX) react to interim releases on the day they are published. The share price quickly rises above the association value. This confirms the finding of DeBondt & Thaler (1985). Following that, the share prices gradually decline to the association value. This confirms the Daniel, Hirshleifer & Subrahmanyam (1998) finding. Thus, the research reported here resolves an apparent empirical conflict. The two studies, simply, take measurements at different stages of the adjustment cycle. In addition, this research discovers that the degree of disclosure has an impact on investor response. This is contradictory to the Fama (1970) efficient markets hypothesis. When the quantity of disclosure is less-than expected, the process is delayed by one day. The process is delayed by three days, when the level of disclosure is greater-than expected. This finding provides a practical dimension for those who prepare or use interim reports.


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