Cross-quarter differential market reactions: An investigation of the audit effect hypothesis
Abstract
Purpose
The purpose of this paper is to investigate the audit effect hypothesis for the cross-quarter differential market reactions to earnings announcements.
Design/methodology/approach
Earnings response coefficients are focused upon as indicators of perceived earnings quality.
Findings
The evidence suggests that investors of Singapore listed companies respond more strongly to earnings announcements in the fourth quarter than other interim quarters. The findings support the notion that investors attach different degrees of reliability to interim quarter earnings relative to final quarter earnings.
Originality/value
Findings in this paper shed new light on the audit effect hypothesis and are relevant to accounting regulators and audit committee members seeking to enhance the credibility of earnings announcements.
Keywords
Acknowledgements
The authors appreciate financial support provided by Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers for this research study.
Citation
Lee, A., Lim, C.Y. and Zhang, T.C. (2016), "Cross-quarter differential market reactions: An investigation of the audit effect hypothesis", Pacific Accounting Review, Vol. 28 No. 2, pp. 219-235. https://doi.org/10.1108/PAR-07-2015-0030
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited