Stock price reaction to earning announcement : Empirical study in Ho Chi Minh stock exchange
Abstract
Which the overall purpose of studying the impact of earnings
announcement on stock performance, this thesis used Ho Chi Minh stock exchange as
a case study and VN30 as a sample. In order to have exactly result, the sample was
divided into two groups: bad news announcements and good news announcements
based on their change in EPS. The classification can give a better comparison in stock
performance and market reaction between good earning news and bad earning news.
Main methodology used in this thesis was the event study, which gives overview
about stock performance and market reaction to earning announcement in a period of
time around announcement date, called event window. Event window was chosen as
[-5;+5] (5 days before and 5 days after the event) based on the characteristics of the
sample. Test of hypothesis was based on the testing whether average abnormal return
(AAR) and cumulative abnormal return (CAAR) can be earned during the event
window. If they were not, it could be concluded that earnings announcement had no
impact on earnings announcement.
The empirical result shows that AAR and CAAR can be earned in some
specific days of two groups, it means earnings announcement had some impacts on
stock performance. Besides, conclusion and recommendation were made to help
investors and firms’ managers have better view of actual market, then have suitable
strategies to maximize the benefits.