We examine how investors interpreted earnings news when the Covid-19 pandemic began. We argue the pandemic made investors unsure about the earnings news’ reliability and valuation implications. We compare earnings announcements in early 2020 to those between 2015 and 2019. During Covid, earnings news significantly increased (decreased) post-announcement abnormal volatility (returns), consistent with investors’ struggling to price the news. However, we find that Covid did not have such an effect on firms that had priorly established a reputation for conservative accounting. This suggests that conservatism, whose information effects have been debated by prior literature, alleviated investors’ concerns during the pandemic.

How did Covid-19 affect investors’ interpretation of earnings news? The role of accounting conservatism

D’Augusta, Carlo
;
Grossetti, Francesco
2023-01-01

Abstract

We examine how investors interpreted earnings news when the Covid-19 pandemic began. We argue the pandemic made investors unsure about the earnings news’ reliability and valuation implications. We compare earnings announcements in early 2020 to those between 2015 and 2019. During Covid, earnings news significantly increased (decreased) post-announcement abnormal volatility (returns), consistent with investors’ struggling to price the news. However, we find that Covid did not have such an effect on firms that had priorly established a reputation for conservative accounting. This suggests that conservatism, whose information effects have been debated by prior literature, alleviated investors’ concerns during the pandemic.
2022
D’Augusta, Carlo; Grossetti, Francesco
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4051838
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 0
  • ???jsp.display-item.citation.isi??? ND
social impact