An Empirical Study On Investors’ Attention Influence Earnings Announcement Effect

Earnings announcement effect shows that because investor underreaction to earningsinformation, so that earnings information is not integrated into the share price in a timelymanner, then delayed reaction appears lately, this underreaction appears may because ofinvestor’ limited attention. Hence one can see that studying earnings announcement effectfrom the perspective of limited attention is reasonable. However, measurement of investors’attention is always a difficult problem in empirical research. As the domestic and foreignscholars began to use the network search volume to replace investors’ attention, so this paperuses Baidu index to replace investors’ attention, and introduces it into the study of theearnings announcement effect.Accordingly, this paper uses the Shenzhen stock exchange information disclosuresystem, Selecting the main board listed A shares as a sample, and uses Baidu index as aproxy for investors’ attention, then analyzes the mechanism of investors’ attention influencesthe earnings announcement effect. The results show that:(1) Investors’ attention has apositive effect on information disclosure.(2) Improving information transparency can reducethe adverse selection, and increase the liquidity of stock.(3) Increasing the stock liquidity,earnings information can quickly integrate into the price.In a word, the contribution of this paper is to draw Baidu index into research andanalyse the mechanism of investors’ attention influence the earnings announcement effect,it can explain the Post Earnings Announcement Drift of Chinese stock to some extent, andstudy the research connection between investors’ attention and earnings announcementeffect to prove the importance of attention. From this, in order to compete for thelimited attention, the company must strengthen the disclosure of information, andincrease the transparence.