The market reaction to 10-K and 10-Q filings and to subsequent The Wall Street Journal earnings...

Abstract Firms sometimes file their 10-K or 10-Q with the Securities and Exchange Commission (SEC) several days before the corresponding earnings announcement appears in The Wall Street Journal (WSJ). In these cases, the 10-K or 10-0 filing constitutes the first public announcement of earnings. This study addresses the question of whether the price and volume reactions to these earnings announcements occur at the SEC filing date or at the subsequent WSJ announcement date. This research can be viewed as a limited test of whether the securities markets are efficient with respect to the data contained in 10-K and 10-0 filings. The generalizability of the test results is limited because of the non random nature of the sample. Tests were performed on daily price and volume data for 342 firm- quarters for which the SEC filing date preceded the WSJ earnings announcement by at least four trading days. The results suggest that there was no significant market reaction, on average, at the SEC filing date, even though the filing was the first public announcement of earnings for the quarter. However, there is evidence of the existence of a market reaction to the subsequent WSJ earnings announcement The direction of the price reaction at the WSJ announcement date is consistent with the sign of unexpected earnings. Wright and Groff (1986) present evidence indicating that the existence of a market reaction to the publicrelease of price-relevant information does not depend on exactly how that information is made public. In contrast, the results presented. in this paper suggest that, In some limited cases, the method of disclosing accounting earnings is related to whether the information embodied in, those earnings will be reflected in security prices ins timely fashion. The results also suggest that, at least In one specific set of circumstances, data disclosed as part of an SEC-mandated filing are not fully reflected in prices until a subsequent media disclosure is made.