Corporate Governance, Market Conditions and Investors’ Reaction to Information Signals

Almaskati, N; Bird, R; Yeung, D; Lu, Y

Corporate Governance, Market Conditions and Investors’ Reaction to Information Signals

Almaskati, N Bird, R Yeung, D

Lu, Y

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Publisher:: SAGE Publications
Publication Type:: Journal Article
Citation:: Australian Journal of Management, 2023, 48, (1), pp. 38-66
Issue Date:: 2023

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Field	Value	Language
dc.contributor.author	Almaskati, N
dc.contributor.author	Bird, R
dc.contributor.author	Yeung, D https://orcid.org/0000-0002-3032-0449
dc.contributor.author	Lu, Y
dc.date.accessioned	2023-02-02T02:24:29Z
dc.date.available	2023-02-02T02:24:29Z
dc.date.issued	2023
dc.identifier.citation	Australian Journal of Management, 2023, 48, (1), pp. 38-66
dc.identifier.issn	0312-8962
dc.identifier.issn	1327-2020
dc.identifier.uri	http://hdl.handle.net/10453/165832
dc.description.abstract	We examine and compare the extent to which the reaction of investors to earnings announcements is influenced by a firm’s governance profile and prevailing market conditions. We find that firms with better governance characteristics experience a larger initial reaction to both good and bad earnings announcements regardless of the prevailing sentiment and uncertainty conditions. However, the influence of governance is constrained to the announcement period. We demonstrate that changes in market uncertainty and/or investor sentiment are related to the post-earnings announcement drift. We also find that a major channel through which greater corporate governance influences the market response to unexpected earnings news is by lowering information uncertainty and so providing greater clarity of the implication of the news for firm value. Finally, we establish that two types of uncertainties (market and information) have very different influence on investor’s response to information signals. JEL Classification: D81, G10, G14, G30, G32.
dc.language	en
dc.publisher	SAGE Publications
dc.relation.ispartof	Australian Journal of Management
dc.relation.isbasedon	10.1177/03128962221096492
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	15 Commerce, Management, Tourism and Services
dc.title	Corporate Governance, Market Conditions and Investors’ Reaction to Information Signals
dc.type	Journal Article
utslib.citation.volume	48
utslib.for	15 Commerce, Management, Tourism and Services
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	closed_access	*
pubs.consider-herdc	true
dc.date.updated	2023-02-02T02:24:27Z
pubs.issue	1
pubs.publication-status	Published
pubs.volume	48
utslib.citation.issue	1

Abstract:

We examine and compare the extent to which the reaction of investors to earnings announcements is influenced by a firm’s governance profile and prevailing market conditions. We find that firms with better governance characteristics experience a larger initial reaction to both good and bad earnings announcements regardless of the prevailing sentiment and uncertainty conditions. However, the influence of governance is constrained to the announcement period. We demonstrate that changes in market uncertainty and/or investor sentiment are related to the post-earnings announcement drift. We also find that a major channel through which greater corporate governance influences the market response to unexpected earnings news is by lowering information uncertainty and so providing greater clarity of the implication of the news for firm value. Finally, we establish that two types of uncertainties (market and information) have very different influence on investor’s response to information signals. JEL Classification: D81, G10, G14, G30, G32.

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http://hdl.handle.net/10453/165832