INVESTORS’ REACTIONS ON PUBLICATION OF QUARTERLY EARNINGS AT ZAGREB STOCK EXCHANGE: TRENDS AND FIRMS SPECIFIC EXPLANATORY FACTORS

This study investigates the investors’ reactions to the publication of quarterly earnings for companies at the Zagreb Stock Exchange. The empirical research based on the event study and 409 firm-year observations confirms that investors react to the publication of quarterly earnings, while the Friedman test indicates that the reactions are most frequent for earnings announcements from the second quarter (Q2). The occurrence of abnormal standardized returns on announcement day suggests that the efficient market hypothesis in semi-strong form does not hold for the Croatian capital market. Moreover, there is evidence of gradual price adjustment after announcement day. Longitudinal analysis in the period 2010-2022 indicated that investors’ reactions are stable and that there is no trend of growth or decline in standardized abnormal returns. The estimated pool regression model revealed that several firm characteristics influence the information content of quarterly earnings. The earnings surprise variable positively affects standardized abnormal returns, while firm size and reporting of losses variables negatively affect standardized abnormal returns. The results of the study confirm to capital market regulators the practical benefits of quarterly financial reporting, to firms that they can use quarterly financial reports to reduce information asymmetry and to investors that after the quarterly earnings publication there is the possibility of achieving abnormal returns. The limitation of this study is relatively small sample in comparison with similar studies. Findings about slow price adjustment after the day of earnings release might be challenged by the occurrence of other price-sensitive information. Some future research might improve findings by use of additional independent variables, like management analysis and analyst forecast, which could shed new light on the quarterly earnings information content at ZSE.