The Impact of Intraday Timing of Earnings Announcements on the Bid-Ask Spread and Depth

Abstract

Libby, Mathieu and Robb (2002) investigate, among other things, the impact of intraday timing of earnings announcements on the bid-ask spread and depth for a sample of firms listed on the Toronto Stock Exchange. They document, in a univariate setting, that the spread is relatively wider and the depth lower after announcements declared during non-trading hours than after announcements released during trading hours. This study extends their research by (a) investigating earnings announcements declared by firms traded on the NYSE or AMEX, (b) addressing this issue in a multivariate setting, (c) exploring before-open and after-close announcements separately, and (d) analyzing the impact by half-hour interval. Interestingly, my results indicate, opposite to the findings by Libby et al (2002), that the spread is relatively smaller and the depth higher after overnight announcements than after daytime announcements. These findings are robust to firm-specific factors, cross-listings, differences in the content of daytime and overnight releases, and intraday timing consistency. In addition, this effect occurs both after before-open and after-close announcements, and the analysis by half-hour interval reveals that the impact on the spread (depth) lasts for four (seven) trading half-hours.

Keywords: intraday, market liquidity, bid-ask spread, depth, earnings announcement

JEL Classification: G12, M41, M47