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Stock Price Reactions to Negative Profit Warnings: An Event Study
Linnaeus University, School of Business and Economics, Department of Management Accounting and Logistics.
Linnaeus University, School of Business and Economics, Department of Management Accounting and Logistics.
2018 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The aim of this study is to investigate if individuals reacts rational to the announcement of negative profit warnings in the Swedish stock market. This is done by using an event study approach, investigating the corresponding abnormal returns and cumulative abnormal returns before, during, and after the announcement. Tests is also made to see whether qualitative and quantitative profit warnings and firm size has any impact on the cumulative abnormal returns. The sample consists of 176 profit warnings from 2008 to 2018. On the announcement day, the average abnormal return at day zero was -6.99 % and the average cumulative abnormal returns at day zero and one was -9.06 %. The results found also that smaller firms generate lower abnormal returns on the announcement date, but that there is no difference between qualitative and quantitative profit warnings. With small and insignificant cumulative abnormal returns before and after the announcement, the reached conclusion is that the market is efficient on aggregate level during the event of negative profit warnings.

Place, publisher, year, edition, pages
2018. , p. 44
Keywords [en]
Profit warning, Efficient Market Hypothesis, Behavioural Finance, Event Study
National Category
Business Administration
Identifiers
URN: urn:nbn:se:lnu:diva-75418OAI: oai:DiVA.org:lnu-75418DiVA, id: diva2:1215876
Subject / course
Business Administration - Management Accounting
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Examiners
Available from: 2018-06-12 Created: 2018-06-10 Last updated: 2018-06-12Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf