Impact of Corporate Earnings Announcements on Stock Returns: Evidence from the Indian Equity Market

Abstract

This study investigates the impact of quarterly earnings announcements on stock returns in the Indian equity market, focusing on firms listed under the S&P BSE 500 index. Using the event study methodology over a 10-year period (2015–2024), the research analyzes abnormal returns surrounding earnings announcements and evaluates the market’s adherence to the semi-strong form of the Efficient Market Hypothesis (EMH). A distinct feature of this study is the classification of earnings announcements into Good News and Bad News to examine asymmetry in market reactions. The findings reveal that earnings announcements generate statistically significant abnormal returns across the full sample, with observable post-announcement drift indicating delayed market adjustment. Furthermore, Good News announcements are met with positive abnormal returns, while Bad News announcements elicit stronger and often anticipatory negative reactions. These asymmetric responses highlight the presence of behavioral biases and information asymmetry in the market. Overall, the persistence of significant abnormal returns after the announcement suggests that the Indian equity market does not fully exhibit semi-strong form efficiency. This study contributes to the literature on market efficiency in emerging economies and offers practical insights for investors, policymakers, and corporate managers regarding the flow of information in the market and the adjustment of stock prices to new information.