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Trading volume and information asymmetry: routine versus nonroutine earnings announcements in Australia

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  • Thusitha Mahipala
  • Howard Chan
  • Robert Faff
Abstract
Focussing on earnings-related rather than different classes of corporate announcements as in Chae (2005), we examine trading volume behaviour and the role played by informed and uninformed investors around routine and nonroutine announcements. Prior to preliminary final earnings announcements, there is a consistent decline in trading volume consistent with higher adverse selection costs. For interim announcements, there is an increase in pre-announcement trading volume while no significant volumes are observed for Annual General Meetings (AGMs) and nonroutine Management Earnings Forecast (MEF) announcements. As for post-announcement, trading volume is negatively related to firm size and number of analysts, suggesting a positive link between volume and information asymmetry. However, the news content of any MEF contained in nonroutine, AGM or interim announcements does not appear to have an impact upon pre- and post-announcement abnormal trading volume.

Suggested Citation

  • Thusitha Mahipala & Howard Chan & Robert Faff, 2009. "Trading volume and information asymmetry: routine versus nonroutine earnings announcements in Australia," Applied Financial Economics, Taylor & Francis Journals, vol. 19(21), pages 1737-1752.
    • Handle: RePEc:taf:apfiec:v:19:y:2009:i:21:p:1737-1752
    DOI: 10.1080/09603100802599639
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    References listed on IDEAS

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    Cited by:

    1. Leonardo Fernandez, 2012. "Price Discovery, Investor Distraction and Analyst Recommendations Under Continuous Disclosure Requirements in Australia," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 3, July-Dece.
    2. Leonardo Fernandez, 2012. "Price Discovery, Investor Distraction and Analyst Recommendations Under Continuous Disclosure Requirements in Australia," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2012, January-A.

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