Market reaction to corporate earnings announcements – Evidence from the Bombay Stock Exchange
Keywords:
Quarterly Earnings, Event Study, Abnormal Return, Market efficiency, BSE 500Abstract
This study examines the impact of earnings announcements on stock performance in the Indian equity market, specifically across large-cap, mid-cap, and small-cap firms listed on the S&P BSE 500. It further evaluates whether the market aligns with the semi-strong form of the Efficient Market Hypothesis (EMH). Utilizing the BSE 500 as a market benchmark, the research employs an event study methodology, leveraging secondary data from the BSE and other financial sources to assess market reactions. The findings reveal a significant influence of quarterly earnings releases on stock returns across all market capitalization segments. Notably, the study identifies a post-announcement price drift, suggesting that stock prices in the Indian market may not immediately and fully absorb earnings information. This delayed response indicates potential inefficiencies, creating opportunities for investors to capitalize on mispricing. Additionally, the presence of abnormal returns during the event window challenges the assumptions of EMH, raising critical questions about the extent of market efficiency in India. By providing a granular analysis of stock price behavior across different firm sizes, this research contributes to the ongoing discourse on market efficiency and price discovery in emerging economies.
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