Information Leakage and Informed Trading Around Unscheduled Earnings Announcements

48 Pages Posted: 24 Aug 2007

See all articles by Campbell Heggen

Campbell Heggen

Deakin University - School of Accounting, Economics and Finance

Gerard L. Gannon

Deakin University - School of Accounting, Economics and Finance

Tony Van Eekelen

Deakin University - School of Accounting, Economics and Finance

Date Written: August 24, 2007

Abstract

While there has been much judicial discussion regarding the competency of Australia's continuous disclosure regime with reference to contemporaneous international standards, there has to date been limited empirical analysis of the Australian system's effectiveness in preventing selective disclosure and information leakage. This paper presents an empirical study of information content and trading behaviour around unscheduled earnings announcements - comprising of profit upgrades, profit warnings and neutral trading statements - made by ASX-listed companies during 2004. The contention is that informed trading impacts on the stock returns and trading volumes of listed entities, and hence abnormal returns or trading volumes observed prior to an announcement provide evidence of information leakage. The paper models a range of factors that potentially influence firm disclosure practices and contribute to the level information asymmetry in the market during the pre-announcement period. Previous research has investigated the influence of firm size and information content in contributing to information leakage. This study further considers the variables of firm growth, capital structure and industry group.

Keywords: Information leakage, Unscheduled Announcements, Downgrades

JEL Classification: G14

Suggested Citation

Heggen, Campbell and Gannon, Gerard L. and Van Eekelen, Tony, Information Leakage and Informed Trading Around Unscheduled Earnings Announcements (August 24, 2007). Available at SSRN: https://ssrn.com/abstract=1009444 or http://dx.doi.org/10.2139/ssrn.1009444

Campbell Heggen

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Gerard L. Gannon

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Tony Van Eekelen (Contact Author)

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

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