Earning Announcements and Stock Prices: An Empirical Analysis of BSE

  • Dinesh Tandon, Deepak Sood, Nitin Thapar


Purpose: The aim of this research paper is to examine the impact on share prices and company market capitalization of earning announcements.

Design/Methodology: Based on a sample of the constituents of the BSE Senses Index, 20 days pre-and 20 days post-earning announcements were compared using event window study. The significance of difference between them was also measured using paired/dependent t-test.

Findings: The results of research showed than the pre-announcement mean closing prices were different from post-mean closing prices, thus impacting the firm’s market capitalization to a large extent. The earning announcements cause a lot of variation in stock prices during post announcement period.

Practical implications: The announcements of earnings and their impact on the firm's value has always been a puzzle. The results will help in a simpler and more concrete way to better understand the impact of earning announcements on corporate market capitalization. The findings of the study have implications for directors, managers, investors and other participants in stock markets.

Keywords: Value of the firm (Market capitalization), Earning announcements (Reporting), Mean closing prices, BSE.