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

Available for download on Tuesday, May 04, 2027

Included in

Accounting Commons

Share

COinS