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Initial Evidence on the Role of Accounting Earnings in the Bond Market

Initial Evidence on the Role of Accounting Earnings in the Bond Market ABSTRACT We document that: (1) the incidence of bond trade increases during the days surrounding earnings announcements, (2) there is a bond‐price reaction to the announcement of earnings, and (3) there is a positive association between annual bond returns and both annual changes in earnings and annual analysts' forecast errors. All of these effects are larger when earnings convey bad news or when the underlying bond is more risky. Taken together, our results suggest that the nonlinear payoff structure of bond securities affects the role of accounting earnings in the bond market. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting Research Wiley

Initial Evidence on the Role of Accounting Earnings in the Bond Market

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References (52)

Publisher
Wiley
Copyright
©, University of Chicago on behalf of the Institute of Professional Accounting, 2009
ISSN
0021-8456
eISSN
1475-679X
DOI
10.1111/j.1475-679X.2009.00333.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT We document that: (1) the incidence of bond trade increases during the days surrounding earnings announcements, (2) there is a bond‐price reaction to the announcement of earnings, and (3) there is a positive association between annual bond returns and both annual changes in earnings and annual analysts' forecast errors. All of these effects are larger when earnings convey bad news or when the underlying bond is more risky. Taken together, our results suggest that the nonlinear payoff structure of bond securities affects the role of accounting earnings in the bond market.

Journal

Journal of Accounting ResearchWiley

Published: Jun 1, 2009

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