Information asymmetry surrounding earnings and dividend announcements: An intra-day analysis

This paper uses high frequency data to evaluate whether information asymmetry in the market is reduced subsequent to corporate earnings and dividend announcements. Changes in the level of information asymmetry due to the announcements are proxied by the rate of change in trading volume, bid-ask spread, cumulative abnormal returns, and order imbalance. Our results show that the release of earnings and dividend reduces information asymmetry, proxied by bid-ask spread and order imbalance. There is no significant change in trading volume. The significant change in cumulative abnormal returns suggests that the announcements have information content. Cross-sectional analysis shows that forecast errors and the timing of the announcements are somewhat related to the change in information asymmetry. Some interaction effects of earnings and dividend on the change in information asymmetry are documented.