DOI
https://doi.org/10.25772/WHS8-MB98
Author ORCID Identifier
0000-0001-9726-8262
Defense Date
2022
Document Type
Dissertation
Degree Name
Doctor of Philosophy
Department
Business
First Advisor
Myung S. Park
Second Advisor
Thomas Hansen
Third Advisor
Mi Zhou
Fourth Advisor
Seong Byun
Abstract
This manuscript investigates the market reaction to a firm’s earnings announcements when institutional investors of the firm are distracted. I find that institutional investor distraction mitigates the market reaction to earnings surprises. I also find this negative effect of distraction on the market reaction is stronger when earnings surprises are positive and when distracted institutional investors are active investors or blockholders. In addition, my results show that the distraction reduces the relation between abnormal trading volume and earnings surprises. I find similar evidence of a reduced earnings-return relationship when I decompose earnings surprises into two components: operating cash flow and accrual surprises. In the cross-sectional analyses, I observe that the negative impact of distraction on the market reaction is stronger in quarters when the difference between high and low industry return is high and that such reduced market reactions are more evident for firms with less risk, with stronger external monitoring, and with greater CEO power. Overall, my findings suggest that distracted institutional investors are less likely to incorporate new information into the pricing of a firm in a timely manner, leading to a weaker market reaction.
Rights
© The Author
Is Part Of
VCU University Archives
Is Part Of
VCU Theses and Dissertations
Date of Submission
5-5-2022