Nonfinancial 8-K disclosures and individual investors' trading during earnings announcement window

Abstract

Purpose

This study investigates the influence of nonfinancial 8-K disclosures released during the earnings announcement window on the abnormal trading activities of individual investors.

Design/methodology/approach

We employ regression analysis in this empirical study to examine the impact of nonfinancial 8-K filings on individual investors' abnormal trading activities.

Findings

Our results reveal that individual investors exhibit higher levels of abnormal trading activities when firms release nonfinancial 8-Ks during the (0,1) window of earnings announcements. This effect is observed for both buyer-initiated and seller-initiated transactions and is particularly pronounced for firms reporting an operating loss. Negative sentiment in 8-Ks significantly intensifies such effect. Additionally, we find that buy-sell consensus increases significantly with concurrent nonfinancial 8-Ks. This suggests that 8-Ks may reduce information noise, leading individuals to trade with greater conviction.

Originality/value

Our study examines the joint influence of nonfinancial 8-Ks and earnings announcements on individual investors' trading activities, thereby providing a novel perspective on the mechanisms through which 8-K filings affect individual investors' trading behaviors.

Citation

Jiang, J. and Wang, W. (2024), "Nonfinancial 8-K disclosures and individual investors' trading during earnings announcement window", International Journal of Managerial Finance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJMF-07-2023-0341