Gao, X. and Gu, J. and Zhang, Y. (2021) 'Option Informativeness Before Earnings Announcements and Under Real Activity Manipulation.', Pacific Accounting Review, 33 (3). pp. 361-375.
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
|Full text:||(AM) Accepted Manuscript|
Available under License - Creative Commons Attribution Non-commercial 4.0.
Download PDF (Accepted Manuscript) (494Kb)
|Publisher Web site:||https://doi.org/10.1108/PAR-07-2020-0090|
|Date accepted:||13 March 2021|
|Date deposited:||19 March 2021|
|Date of first online publication:||21 May 2021|
|Date first made open access:||16 June 2021|
Save or Share this output
|Look up in GoogleScholar|