Keywords

investor attention, March Madness distraction, earnings announcement response

Abstract

Each year, the NCAA basketball tournament (March Madness) is a daytime distraction for millions of people, providing a largely exogenous shock to investor attention. We investigate whether March Madness influences the market response to earnings by diverting investor attention away from earnings news. We find that the price reaction to earnings news released during March Madness is muted. This result generally holds across several samples and additional analyses. We also find that the result is more muted for low institutional ownership firms, consistent with the effect being driven by less-sophisticated investors. Furthermore, we find that it takes the market 30 to 60 days to correct for the distraction effect. Overall, we provide a unique test of the theory of limited attention by documenting that extraneous events can have a significant impact on the pricing of earnings.

Original Publication Citation

Drake, M.S., Gee, K.H. and Thornock, J.R. (2016), March Market Madness: The Impact of Value-Irrelevant Events on the Market Pricing of Earnings News. Contemp Account Res, 33: 172-203. https://doi.org/10.1111/1911-3846.12149

Document Type

Peer-Reviewed Article

Publication Date

2015

Publisher

Contemporary Accounting Research

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

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