A Cross-Time Study Of U.S. Earnings, Splits, And Dividends Data

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This paper details the share price reaction to dividend, earnings, and stock split announcements over a 37-year period. It first considers whether there is differential information content in similar corporate news announcements for different types of firms. Second, it investigates whether the value of news information about these firms has declined over time (addressing the question of whether news has become "less newsworthy"). We go on to study the relationship between stock price reactions to corporate news announcements and characteristics of the firms. Operating under the assumption that news announcements have an asymmetrical impact on stock price according to factors like firm size, years of being publicly traded, or industry classification, we categorize firms by whether their corporate news announcements will be more or less valuable to the public. For example, since the public may know more about larger firms, we expect the market to react less strongly (in absolute value) to new information from large firms. We find strong support for this hypothesis. We find little evidence that is consistent with the idea that "news has become less newsworthy" over the past four decades. However, although we do find that the share price reaction to "good" dividend news has become less positive and to "bad" dividend news has become less negative over time, no such related evidence exists for stock splits and earnings announcements. We also find an increase in standard deviation of three day returns around earnings and splits announcements over time, with noteworthy convergence amongst positive, negative and neutral earnings announcements. Additional investigation of entire distributions of returns using kernel density estimators also rejects the "news is no longer newsworthy" idea.
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