ABSTRACT: We examine whether the two distinct post-earnings-announcement drifts associated with seasonal random-walk-based and analyst-based earnings surprises are attributable to the trading activities of distinct sets of investors. We predict and find that small (large) traders continue to trade in the direction of seasonal random-walk-based (analyst-based) earnings surprises after earnings announcements. We also find that when small (large) traders react more thoroughly to seasonal random-walk- (analyst-) based earnings surprises at the earnings announcements, the respective drift attenuates. Further evidence suggests that delayed small trades associated with random-walk-based surprises are consistent with small traders’ failure to understand time-series properties of earnings, whereas delayed large trades associated with analyst-based surprises are more consistent with a longer price discovery process. We also find that the analyst-based drift has declined in recent years.

ABSTRACT: We examine a potential benefit associated with the initiation of voluntary disclosure of corporate social responsibility (CSR) activities: a reduction in firms’ cost of equity capital. We find that firms with a high cost of equity capital in the previous year tend to initiate disclosure of CSR activities in the current year and that initiating firms with superior social responsibility performance enjoy a subsequent reduction in the cost of equity capital. Further, initiating firms with superior social responsibility performance attract dedicated institutional investors and analyst coverage. Moreover, these analysts achieve lower absolute forecast errors and dispersion. Finally, we find that firms exploit the benefit of a lower cost of equity capital associated with the initiation of CSR disclosure. Initiating firms are more likely than non-initiating firms to raise equity capital following the initiations; among firms raising equity capital, initiating firms raise a significantly larger amount than do non-initiating firms.