Journal of Economics and Management Volume 17, No. 1 March, 2021

Response to Unexpected Earnings and the 52-Week-High Anchoring

Yu-Hsiu Lin

Department of Finance and Information, Kaohsiung University of Science and Technology, Taiwan

Min Han Wu

Department of Finance and Information, Kaohsiung University of Science and Technology, Taiwan

Abstract

We examine post-earnings-announcement drift (PEAD) in the Taiwan stock market and analyze its relationship with the 52-week-high anchoring. The empirical results are as follows: First, unexpected earnings positively affect subsequent abnormal returns, whereas the proximity of a stock price to its 52-week high negatively influences subsequent abnormal returns. Second, the magnitude of subsequent abnormal returns in response to unexpected earnings is decreased when the current stock price is near its 52-week high. Finally, we reveal that a high level of foreign institutional investor ownership can mitigate the PEAD effect. However, the PEAD effect is strengthened in the subsample with high board director ownership.

Keywords：Unexpected Earnings, Post-Earnings-Announcement Drift, 52-Week-High Anchoring.

JEL Classifications：G14, G40.

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