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Market reaction to regulatory policy changes in financial statements filings: evidence from Turkey

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Abstract

Financial reporting has a vital impact on investors for acquiring and integrating value-relevant information in making or revising investment decisions. This article investigates how changes in regulatory disclosure policy for financial reporting influence market reaction for the companies listed on Borsa Istanbul over the period 2003–2017. We elaborate our findings in the context of investor attention and trading opportunities, resulting in three distinct policies. The results reveal that small-cap firms are more exposed to abnormalities than large-cap firms for positive news before and after the public disclosure platform (PDP). Further, the number of financial statements filings made on the same day affects the abnormal returns before the PDP (from 2003 to June 2009) and, after the PDP (from 2009 to 2013), where the companies are allowed to release them intra-day. Additionally, the response of investors to financial statements filings on Friday is quite different than other days of the week before the PDP and after the PDP (from 2013 to 2017), where the companies are required to make their release only after the market closure. Finally, as a search-facilitating technology, the adaptation of eXtensible Business Reporting Language (XBRL) does not translate into an improvement on market reaction. These findings support the validation of limited investor attention and post-announcement drift in the Turkish capital market.

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Notes

  1. The decision on the size of the event window is subjective and changes from one study to another. In this study, we define it according to the frequency of data: quarterly.

  2. The results are not reported in the tables, but will be given upon request.

  3. The results are not reported in the tables, but will be given upon request.

  4. The results for the mean adjusted model and the market adjusted model are not reported, but will be given upon request.

  5. https://www.mkk.com.tr/en/content/About-Us/About-MKK, 22/11/2019.

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Authors and Affiliations

  1. Director of Management Department, Ibn Haldun University, Istanbul, Turkey

    Mustafa K. Yılmaz

  2. Department of Business Administration, Faculty of Economics and Administrative Sciences, Yalova University, Yalova, Turkey

    Mine Aksoy

  3. Istanbul, Turkey

    Tankut T. Çelik

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  1. Mustafa K. Yılmaz
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  2. Mine Aksoy
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  3. Tankut T. Çelik
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Correspondence to Mine Aksoy.

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Appendix

Appendix

See Tables 9 , 10 and 11 .

Table 9 Runs test and sign test results for positive surprises
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Table 10 Runs test and sign test results for negative surprises
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Table 11 Overview of firms as of 2017/03
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Yılmaz, M.K., Aksoy, M. & Çelik, T.T. Market reaction to regulatory policy changes in financial statements filings: evidence from Turkey. Eurasian Econ Rev 10, 567–605 (2020). https://doi.org/10.1007/s40822-020-00142-5

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