Corporate governance as a drift anchor? Post-earnings announcement drift and corporate governance quality in the Swedish stock market

Sammanfattning

This paper examines whether post-earnings announcement drift is present in the Swedish stock market and extends the analysis by exploring whether corporate governance quality mitigates the magnitude of the drift. The study is based on non-financial firms listed on the Nasdaq Stockholm Stock Exchange between January 2010 and December 2022, employing an event study methodology complemented by cross-sectional regression analysis. First, the presence of PEAD is investigated, followed by an analysis of the impact of corporate governance quality on PEAD for the subsample of firms for which governance data is available. The findings confirm the presence of PEAD in the Swedish stock market, with earnings surprises serving as a significant predictor of future abnormal returns for up to 12-months following the earnings announcement. However, the study provides limited evidence that corporate governance quality mitigates PEAD, despite the interaction term being negative and statistically significant for the 6-month holding period. Since the governance data primarily includes larger firms that may already exhibit more efficient pricing, attributing the less persistent PEAD solely to governance quality is less conclusive.