The effect of asymmetric timeliness in the reporting of good and bad news on the properties of profitability: Evidence from Athens Stock Exchange

Abstract

Purpose

Prior evidence suggests the existence of asymmetric timeliness in the reporting of good and bad news of firms that trade in the Athens Stock Exchange. The purpose of this paper is to explore whether these results are consistent with inferences related to persistence property of earnings for firms that trade in the Athens Stock Exchange.

Design/methodology/approach

The research design employs both level regression specification and change regression specification and it is based on pool cross‐sectional regressions. Empirical results after classifying observations are reported based on both the sign of prior period and current period firms' return, while a number of sensitivity tests are employed.

Findings

According to prior evidence, bad news is recorded more timely than good news but in an unbiased and non‐conservative way. This implies that earnings shocks of firms with bad news should present persistence. Results from an ex‐ante perspective verify these arguments while results from an ex‐post perspective do not.

Originality/value

In contrast to other studies that report results that, in bad news periods, firms' earnings tend to present lower persistence than firms' earnings in good news periods, because managers conservatively report bad news, this paper focuses on a sample of firms that seems to report bad news in a timely way.

Citation

Eriotis, N., Siriopoulos, C., Vasiliou, D. and Zisis, V. (2009), "The effect of asymmetric timeliness in the reporting of good and bad news on the properties of profitability: Evidence from Athens Stock Exchange", Managerial Finance, Vol. 35 No. 11, pp. 918-929. https://doi.org/10.1108/03074350910993809