Response to Discussion of “Security Returns and Volume Responses around International Financial Reporting Standards (IFRS) Earnings Announcements”

This paper responds to Perkins' (2016) preferred methodology-association study rather than the use of an event study research design in Olibes' (2016) paper (Security Returns and Volume Responses around International Financial Reporting Standards (IFRS) Earnings Announcements). As noted by Collins and Kothari (1989), association studies recognize that investors likely learn “information about earnings and valuation relevant events from non-accounting information sources." As Callen et al (2009, 1364) note, event study analyses provide more direct evidence regarding the information conveyed of earnings disclosures. Most notably, in an empirical setting in which the focus is on testing the impact of new earnings information on stock returns and trading volume, it is vital to know when information arrives and the duration investors use that information in making investing and trading decisions. This reasoning justifies the methodology employed in Olibe (2016).