Effect of quarterly earnings announcement under different market conditions: An empirical study of companies constituting SENSEX

Abstract

Purpose

The main purpose of this research study is to investigate the impact of quarterly earnings announcements on stock price movement of the firms constituting the SENSEX under two different market conditions – booming followed by recessionary. Analysis of price effect of quarterly earnings announcements during the five-year period prior to trading suspension, which is also characterized by a booming market condition have been made. Similar analysis during the five-year period following the trading suspension and marked by recessionary market condition has also been carried out side by side.

Design/methodology/approach

Event study methodology using daily returns and market model has been used for the purpose of analyzing the quarterly earnings announcement effects on the security prices of the firms. A sign test has also been used along with the event study.

Findings

The study reveals that quarterly earnings announcement does not have statistically significant effect on stock returns during the booming as well as the recessionary market conditions. The impact of quarterly earnings announcements on stock price movement of firms constituting the SENSEX has been similar for both periods undertaken in the study.

Research limitations/implications

The study has been undertaken using the firms listed in BSE SENSEX. The effect of the quarterly earnings announcement with reference to firms listed in other indices, if covered, may provide different sets of results.

Originality/value

The paper identifies the informational value of quarterly earnings announcement of BSE-SENSEX.

Citation

Das, S., Kanta Pattanayak, J. and Pathak, P. (2014), "Effect of quarterly earnings announcement under different market conditions: An empirical study of companies constituting SENSEX", Journal of Indian Business Research, Vol. 6 No. 2, pp. 128-154. https://doi.org/10.1108/JIBR-09-2013-0087