Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)




The primary objective of this study was twofold. First, to examine the information content of quarterly earnings announcements. Second, the effects of firm size, timeliness of earnings announcements, price-earnings ratio, industry, sign, and magnitude of unanticipated earnings on market response were examined. The research procedure employed the market residual analysis technique to determine how the market behaves in response to earnings reports. The research sample consisted of 319 firms representing ten major industries. A total of 1657 quarterly earnings announcements were made by these firms over a two-year period. The data for this study were collected from the Wall Street Journal, COMPUSTAT tapes and CRSP tapes. The analysis was divided into three parts. First, the information content of quarterly earnings announcements was examined by evaluating the ratio between the test period price residuals and the comparison period residuals. The second part of the study evaluated the association between the magnitude of unanticipated earnings and security prices using the Spearman rank correlation test. In the final part, the effect of corporate characteristics on market response to earnings reports was investigated. The results of this study indicate that (1) quarterly earnings reports appear to contain useful information to security investors; (2) the new information conveyed by quarterly earnings reports is impounded in security prices gradually over the report period; (3) the highest level of market response to quarterly earnings announcements occurs one day prior to the publication of the earnings reports in the Wall Street Journal; (4) the magnitude of market response to third quarter announcements is greater than the market response to either first or second quarter; and (5) the magnitude of market response to earnings reports appears to be conditional on firm size and time of announcement. Small size firm announcements convey more information than those of large size firms, and announcements made in the first month following the end of the reporting period possess more information content than second month announcements, negative unanticipated earnings tend to generate stronger market reaction than positive ones; and high levels of unanticipated earnings appear to be associated with greater market response than low levels.