The Relative Value of Non‐U.S.‐Based Annual Reports and Accounts: A Price and Trading Volume Analysis

Abstract

This paper reports the results of the effects of the release, in the United Kingdom, annual reports and accounts (ARA), on security prices and trading volume of the U.K. firms. If the information reported in the annual reports and accounts (ARA) is relevant, the U.S. security market will respond to the release news through return and volume variances. Both signals are indicators of the relevance of the annual reports and accounts. The results of the analysis suggest the existence of unexpected returns to the annual reports and accounts and no corresponding U.S. trading volume response. The price results are in marked contrast to the findings of previous research that examined the information content of U.S. domestic annual reports, but do not detect a stock price response (e.g., Foster et al. 1986; Bernard and Stober 1989; Cready and Mynatt 1991). Our stock price analyses indicate that non‐U.S. GAAP accounting measures do not impede U.S investors' ability to use U.K. firms' ARA in valuing the sample firms. Indeed, U.S. investors use information from the ARA in their valuation of U.K. firms. Since trading responses to a disclosure are generally more easily detected than price responses (Cready and Hurtt 1999), these findings jointly suggest the provincial nature of the ARA release.

Does the XBRL Reporting Format Provide Incremental Information Value? A Study Using XBRL Disclosures During the Voluntary Filing Program

“…ThePatell (1976) test for studying information content is used in several studies includingStice (1991),Lobo and Mahmoud (1989),Atiase (1985Atiase ( , 1987,Cho and Jung (1991),Shores (1990),Chari et al (1988), andMcNichols and Manegold (1983), among others.19 This methodology has been used to study information content byCready and Mynatt (1991),Asthana and Balsam (2001), andOlibe and Cready (2003), among others.…”

The incremental information content of non-US GAAP earnings disclosures: Evidence from UK firms

“…Olibe reports significant market reaction in the US in the days surrounding the AGM in UK. Similarly, Olibe and Cready (2003) examined the incremental information content of annual reports and accounts (ARA) of UK firms. They detected changes in equity prices but no corresponding volume response is found in the US.…”