An event study examines the return behavior of a sample of firms experiencing common type of event, for e.g., earning announcement, stock split, issue of new debt or equity, merger and acquisition and so on. The objective is to asses the significance of the economic event on the market value of the firm. This paper investigates the impact of quarterly earnings announcements on the stock price movement of the firms constituting the BSE-Sensex. Daily return data has been used to study the mean stock price effect. The effect of clustering of events has been accommodated to analyze the effect of announcements. The study also examines the drifting up of share prices with reference to `good announcement' and `bad announcement'.

Stock market react s to various corporate announcements. One such significant announcement, which has bearings on the stock price movement of the firm, is earnings information. This phenomenon is reflected from the abnormal stock return of the firm surrounding the announcement. The magnitude of abnormal return provides a direct measure of unexpected change in security holders' wealth associated with the event (Kothari and Warner, 2004). The effect of the earnings announcements has been found to persist for significant time creating post earning announcement drift. However, the magnitude of the effect and the time taken to incorporate the information content of earnings announcements varies from market to market and depend on characteristics of the firm under study. Thus, the effect of the earnings announcements is an important empirical matter in capital market, influencing the movement of share prices (Das et al., 2007).

The main objective of this study is to investigate the impact of quarterly earning announcements on stocks constituting Sensex. The study of the effect of clustering of events dating on the overall stocks return has been incorporated in this study. If quarterly earning announcements have informational significance for investor then such announcement should induce abnormal stock return during the period surrounding the announcement. The study also investigates whether stocks manifest price drift over a period of time corresponding to `good' and `bad' announcements. Usually, statistically significant price changes occur in the predicted direction i.e., upward drift in the case of good announcements and downward drift in the case of bad announcements (Das et al., 2007).

This paper first reviews the available literature on the impact of earnings announcement on stock price movement in national and international context. Then it discusses the objectives of the study and highlights the methodology adopted. Further it analyzes the data and interprets the results. Finally it concludes the discussion.

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