Who Drives the Price Reaction After Earnings Announcement?

Sammanfattning

The aim of this thesis is to study whether high retail ownership of a firm impacts the market response to an earnings announcement. To this end, I utilize the traditional event-study methodology in combination with cross-sectional regression. The latter is used to examine whether a company’s ownership structure affects abnormal returns. Two event windows were analyzed, a three-day window and an eleven-day window, both with an estimation period of 250 days. The fund ownership as a share of free float was used as an inverse proxy variable for retail ownership. Out of eight cross-sectional regressions, a statistically significant impact for this variable was found in only one instance. As such this study did not show any significant impact for the differences in the underlying ownership of the free float. The event study found the expected market reaction following beating or missing market expectations. These findings point to markets either being effective or that the effect of this factor is insignificant.