Financial Performance Disclosure and its impact on Financial and Operational Managerial Decisions : Evidence from an Event Study and Fixed-Effect Panel Regression Analysis

Sammanfattning

This study examines whether investor reactions to quarterly financial performance disclosures are associated with subsequent managerial financial and operating decisions. Drawing on signaling theory, the semi-strong form of market efficiency, stock price informativeness and agency theory, the study proposes an informational feedback loop in which financial performance disclosures generate investor reactions observable in stock prices that may function as observable feedback signals for managers altering subsequent managerial financial and operating decision making. While prior research has examined investor reactions and managerial responses to capital market pressure separately, less is known about whether disclosure-period abnormal stock returns are associated with managerial decision measures in the following quarter. Using data from 137 listed Nordic firms from 2020 to 2024, the study applies a two-stage empirical design. A market-model event study measures investor reactions through cumulative abnormal returns around quarterly disclosure dates. Two-way fixed effects panel regressions then examine whether these reactions are associated with subsequent accounting-based financial and operating managerial decision measures. The measures include abnormal real activity measures, working capital adjustments and cost-investment intensity. The event study results show that financial performance disclosures are frequently associated with abnormal stock returns, with significant cumulative average abnormal returns observed in 12 out of 20 quarterly disclosure events in the primary three-day event window. This supports the view that financial performance disclosures contain value relevant information for investors. The regression results provide only partial and outcome-specific evidence of the proposed feedback loop. Investor reactions are significantly associated with abnormal cash flow from operations, abnormal discretionary expenses, and inventory changes, but not with abnormal production costs, receivable changes, capital expenditure intensity, or SG&A intensity. The evidence is strongest for abnormal cash flow from operations, although low explanatory power indicates limited economic significance. No evidence is found that the association between investor reactions and subsequent managerial decision measures is stronger following negative abnormal returns. Overall, the findings suggest that investor reactions are associated with selected short-term operating and working capital outcomes, but do not support a broad, economically strong or asymmetric managerial feedback mechanism. The study therefore refines the proposed informational feedback loop by showing that disclosures generate investor reactions, while the association between these reactions and subsequent managerial decisions remains selective and limited.