The preholiday corporate announcement effect

• Published in: Journal of financial markets (Amsterdam, Netherlands) Vol. 45; pp. 61 - 82
• Main Authors: Autore, Don M., Jiang, Danling
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01-09-2019
• Subjects: Corporate announcements; Market efficiency; Market reaction; Mood; Preholiday effect; Preholiday effect; Mood; G30; Market reaction; Market efficiency; Corporate announcements; G14
• ISSN: 1386-4181; 1878-576X
• DOI: 10.1016/j.finmar.2019.06.004

We find that investors react more favorably to corporate announcements of share repurchases, SEOs, earnings, dividend changes, and acquisitions if the announcement is made immediately prior to or on holidays. These announcements are associated with more positive reactions for favorable events and less negative reactions for unfavorable events. This effect is robust to controls for market conditions and a selection bias, is accompanied by subsequent reversals, and is present in several international markets. Our findings suggest that predictable individual mood changes can cause biases in market reactions to firm-specific news.
•We find more favorable market reactions to preholiday corporate announcements.•Investor mood tends to rise prior to major holidays.•This effect is robust to controls for market conditions and a selection bias.•The effect is accompanied by subsequent reversals and present in several international markets.