The type of corporate announcements and its implication on trading behaviour

Abstract

I report the empirical evidence to show how firms' expected and unexpected announcements affect investors' trading behaviour. I find that trading volume decreases before expected announcements, either scheduled or unscheduled, consistent with models that predict that discretionary liquidity traders may postpone their trading until after an anticipated news release. I also find that the magnitude of pre-announcement trading reactions is negatively associated with the level of pre-disclosure information asymmetry. I further find that trading volume is boosted before unexpected announcements, and the relation between the magnitude of pre-announcement trading reactions and the predisclosure information asymmetry is weakly significant or insignificant.

Is The Rights Offering Announcement Good or Bad?

“…In line with Zheng (2020), trading volume will increase after the announcement is published. Ariani et al (2016) announcements about effective dates contain information that can influence investor preferences.…”

“…found that after rights offering announcement causes a change in preferences for investors. Changes in liquidity around news publications reflect investors' expectations of the company's future performance(Chen et al, 2020) Zheng (2020). found that trading volume decreased on unexpected and expected announcements.…”