Market efficiency and information content of financial statement earning announcements in ISE

Abstract

This study investigates the impact of earning values of quarterly and annual financial statement announcements on stock prices and trade volumes for the stocks listed in Istanbul Stock Exchange National Market during the time period 1992-1995 The relationship between accounting information and price/trade volume is examined from two aspects. The first aspect is ''information-content test" and it measures the extent to which announcements convey information to the stock market. The results indicate that the price/trading volume changes on the day of the announcement is no different than any of the other date and no significance relationship is found between price/trading volume changes and earnings announcements. The second aspect is "market-efficiency test" and it investigates whether accounting earnings reflect factors that affect stock prices and how soon that inlormation is assimilated into stock prices. The results indicate that the accounting earnings does not reflect factors that affect stock prices and despite how strong the early information one has obtained, he can easily loose money