INVESTORS’ BEHAVIOR IN REGARD TO EARNINGS ANNOUNCEMENT DURING THE COVID-19 PANDEMIC: EVIDENCE FROM CAMBODIA

Abstract

Purpose - The study investigates the reaction of investors to annual earnings releases as reflected in the share price movements of common stocks and volume of trade during the COVID-19 pandemic. The main gap this study aims to fill is whether earnings announcements possess informational value for investors during macroeconomic uncertainty in the wake of a pandemic. Methodology - Event methodology is employed, and the returns in an event window, defined conventionally as the days before to days after a firm-specific public earnings announcement, are not abnormal. Findings- We provide an apparent example where investors did not react to firm-specific positive and negative earnings announcements in the wake of the global pandemic. This could be influenced by the government response to COVID-19 as we have seen governments and central banks worldwide quickly enacted sweeping and sizable fiscal and monetary stimulus measures to limit the human and economic impact of the COVID- 19 pandemic. These types of government actions during economic downturns or crises have proved to helped stabilized the economy and increase confidence in the market in the short term and alleviate long-term consequences. Conclusion- The study intended to contribute to the existing literature on earnings announcements by analyzing the information content of earnings announcements in a small Cambodian stock market during the COVID-19 pandemic period. Even though it was expected that positive or negative earnings announcements during a recession or economic downturn would result in significant price reactions from investors, the study has indicated that the information content of earnings announced by companies listed on CSX was beyond investors’ interest. The puzzling price pattern following positive and negative earnings announcements on the Cambodian stock market could also be explained by behavioral principles, an issue to be addressed in further research. Cultural dimensions and their disparity between countries can also be reflected differently on pricing models.

Keywords

• Event study
• information and market efficiency
• corporate earnings announcement
• COVID-19
• Cambodia market

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