While increases in earnings are common, we identify a setting in which they signal a separating equilibrium. Firms that “defy gravity' (DG) by reporting increases in earnings despite experiencing a decline in sales from continuing operations, signal their viability as a going- concern, and...

This paper studies how firms manage liquidity around seasoned equity offerings and the impact of such behaviour on long run performance. We identify a pre-issue ‘debt trap' scenario where issuers raise equity to escape from the debt trap problem. We find some evidence that issuers with a debt...

We investigate firms' liquidity practices around seasoned equity offerings (SEOs). We broadly classify issuers on the basis of whether the firm belongs to an industry deemed to be financially constrained or unconstrained. We find that constrained-industry issuers tend to save more cash to...

This paper examines the association between insider trading before an earnings announcement and the magnitude of the post-earnings announcement drift (PEAD). Consistent with insiders' private information being incorporated into prices through their trading, we find PEAD is significantly lower...

We show that the post earnings announcement drift (PEAD) is stronger for conglomerates thansingle-segment firms. Conglomerates, on average, are larger than single segment firms, so it isunlikely that limits-to-arbitrage drive the difference in PEAD. Rather, we hypothesize that marketparticipants...

We investigate whether ESG ratings predict future ESG news and the associated market reactions. We find that the consensus rating predicts future news, but its predictive ability diminishes for firms with large disagreement between raters. Relation between news and market reaction is moderated...

Analysts' functions are divided into discovery and interpretation roles, but separating between the two is non-trivial. We conjecture that analysts' interpretation skill can be gauged by their forecast revisions following material unanticipated news — in particular following non-earnings 8-K...

This paper examines the association between insider trading prior to quarterly earnings announcements and the magnitude of the post-earnings announcement drift (PEAD). We conjecture and find that insider trades reflect insiders’ private information about the persistence of earnings news. Thus,...

We address whether analysts bias earnings forecast revisions and convey the bias using forecast revision consistency, i.e., the extent to which analyst reports with earnings forecast revisions include stock recommendation and target price revisions consistent in sign with the earnings forecast...

Can an earnings announcement decrease disagreement about fundamentals while simultaneously increasing disagreement about price? Recent theory suggests the presence of short-horizon investors can lead to a polarization of higher-order beliefs about price (i.e., beliefs regarding the opinions of...