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Market reaction to banks’ interim press releases: an event study analysis

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Abstract

This study measures the effect of financial reporting on the prices and volumes traded of banks’ outstanding stocks around the disclosure of interim financial information, which is a critical issue in a bank strategy, its management and corporate governance as a whole. We investigate whether earning press releases are relevant for driving investor decisions by using a multi-model event study on a sample of 674 press releases disclosed during the period 2010–2017 from the 28 Global Systemically Important Banks (G-SIBs). Our results show a negative statistically significant impact on stock prices and trading volumes in the very next days following the publication date of a press release. This calls for a reflection on the need to regulate earnings press release contents and propose a standardized framework of disclosure. The study extends a multi-dimensional insight for various stakeholders and contributes to the ongoing debate of financial disclosure in banking institutions.

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Fig. 1
Fig. 2

Notes

  1. Although the accounting standards may differ from one jurisdiction to another (eg. European Countries and Japan follow IFRS accounting standards; United States adopts US Generally Accepted Accounting Principles; China has its own principles), all the banks included in the sample produce IFRS-compliant financial statements (in particular for China this is as a result of their dual listings in Hong Kong and other international markets, https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/china/).

  2. Except for the correlation between the ratios equity/TA and Tier 1 ratio (which is − 0.282).

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Acknowledgements

We thank Nicola Cucari, Francesco Paolone and Muhammad Ghufran for their excellent research assistance.

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Correspondence to Valentina Lagasio.

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Lagasio, V., Brogi, M. Market reaction to banks’ interim press releases: an event study analysis. J Manag Gov 25, 95–119 (2021). https://doi.org/10.1007/s10997-020-09516-y

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