X. Gao
Option Informativeness Before Earnings Announcements and Under Real Activity Manipulation
Gao, X.; Gu, J.; Zhang, Y.
Abstract
Purpose. This article investigates whether single name options trading prior to earnings announcements is more informative when there exist real activit y manipulation s Design/methodology/approach. Using 5,419 earnings announcements during 2004 20 18 made by 208 public U.S. companies with relatively high option s volume s ranked by the CBOE , we uncover two regularities using predictive regressions for stock return Findings. F irst, the total option s v olume up to twenty day s pre announcement is significantly higher than that in other periods only for earnings management firms ; moreover, after detailing options characteristics , we find these intensive pre announcement trading to be concentrate d in transactions of in the money call and long term maturity put option s . an increase in the single name call minus put options volume can positively predic t the underlying stock s next day excess return much better in real earnings management firms with a larger magnitude of effect in periods right before regular earnings announcement dates Originality/value. This paper make s a marginal and novel contri bution by showing that real earnings management can serve as a proxy for the potential profit f rom informed trading in options as the return predictability of options volume becomes stronger for firms that have the manipulation motiv e and indeed perform manipulative actions
Citation
Gao, X., Gu, J., & Zhang, Y. (2021). Option Informativeness Before Earnings Announcements and Under Real Activity Manipulation. Pacific Accounting Review, 33(3), 361-375. https://doi.org/10.1108/par-07-2020-0090
Journal Article Type | Article |
---|---|
Acceptance Date | Mar 13, 2021 |
Online Publication Date | May 21, 2021 |
Publication Date | Aug 13, 2021 |
Deposit Date | Mar 16, 2021 |
Publicly Available Date | Mar 19, 2021 |
Journal | Pacific Accounting Review |
Print ISSN | 0114-0582 |
Publisher | Emerald |
Peer Reviewed | Peer Reviewed |
Volume | 33 |
Issue | 3 |
Pages | 361-375 |
DOI | https://doi.org/10.1108/par-07-2020-0090 |
Public URL | https://durham-repository.worktribe.com/output/1245427 |
Files
Accepted Journal Article (Accepted Manuscript)
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Publisher Licence URL
http://creativecommons.org/licenses/by-nc/4.0/
Copyright Statement
Accepted Manuscript
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