E-resources
Peer reviewed
Open access
-
He, Guanming
Journal of business finance & accounting, July/August 2021, 2021-07-00, 20210701, Volume: 48, Issue: 7-8Journal Article
This study first establishes a robust link between credit rating and post‐earnings‐announcement drift (PEAD). I find strong evidence that PEAD is more salient for firms with low credit ratings. This finding is consistent with the notion that investors are prone to underreact to earnings news from low credit rating firms that are characterized by high uncertainty of asset fundamentals. The association between credit rating and PEAD is not driven by traditional information uncertainty proxies such as earnings volatility, cash flow volatility, accruals quality, firm age, idiosyncratic volatility, and analyst forecast dispersion. I further investigate whether transient institutions exploit the differential of PEAD among different rated firms in their arbitrage trades. The results reveal that transient institutions tend to focus their arbitrage on low credit rating firms. However, the existence and concentration of PEAD in low credit rating firms suggest that transient institutions fail to arbitrage away PEAD among low‐rated firms and that the arbitrage strategy is riskier than expected by the transient institutions. This in turn implies that estimation risk associated with pricing the earnings news of low‐rated firms plays a substantive role in forming the strong PEAD of these firms.
Author
![loading ... loading ...](themes/default/img/ajax-loading.gif)
Shelf entry
Permalink
- URL:
Impact factor
Access to the JCR database is permitted only to users from Slovenia. Your current IP address is not on the list of IP addresses with access permission, and authentication with the relevant AAI accout is required.
Year | Impact factor | Edition | Category | Classification | ||||
---|---|---|---|---|---|---|---|---|
JCR | SNIP | JCR | SNIP | JCR | SNIP | JCR | SNIP |
Select the library membership card:
If the library membership card is not in the list,
add a new one.
DRS, in which the journal is indexed
Database name | Field | Year |
---|
Links to authors' personal bibliographies | Links to information on researchers in the SICRIS system |
---|
Source: Personal bibliographies
and: SICRIS
The material is available in full text. If you wish to order the material anyway, click the Continue button.