The primary goal of this paper is to study whether the permanent price impact of large trades are greater before or after an interim earnings announcement on the Helsinki Stock Exchange. If the permanent price effects of large trades are greater before the announcement this would suggest that investors believe that some traders are better informed before the interim earnings announcement than after. Theoretical support is available that information asymmetry is greater prior to earnings announcements than after. The anticipation of a forthcoming public announcement stimulates the acquisition of private information, causing an increase in information asymmetry. This increase is facilitated by the flow of earnings-related information to the market (e.g., via pre-announcement communications by firms, actual earnings announcements of competitors, etc.). Thus investors gather information, make assessments, and form trading positions accordingly. In addition, compared to individuals (small investors), institutions (large investors) are better informed because they tend to have lower marginal costs of information gathering. Thus large trades are expected be monitored more closely on the trading screen and the information content for pricing purposes is expected to be larger for these trades than for corresponding small trades. Using permanent price effects as a measure of price adjustment for private information, tests were performed to see whether price adjustments are greater in pre-announcement periods than in post-announcement periods. The results, based on interim earnings releases, suggest that large trades do indeed produce greater permanent price effects before an announcement than after it. This suggests that large trades associated with price changes (especially uptick trades) before an announcement send a stronger signal to other investors than similar trades after the announcement. For small trades the results were insignificant.

This study examines whether managerial forecasts of annual effective tax rates, disclosed in interim financial statements, are useful in predicting future quarterly earnings, are incorporated in financial analysts' forecasts of quarterly earnings, or are impounded in stock prices. The integral view of interim financial reporting requires managers to make their best estimate of the effective income tax rate (ETR) expected to be in effect for the full fiscal year. Thus, the ETR reflected in interim financial statements represents the disclosure of certain private information regarding management's expectations for forthcoming earnings. Auditors review the income tax provision in conjunction with the release of interim financial statements, arguably lending credibility to management's ETR forecast. Our empirical analyses show that interim effective tax rate disclosures are useful in predicting next-quarter earnings. However, financial analysts generally underutilize this information when firms report large decreases in ETR. Surprisingly, small ETR increases are related to higher future earnings, and a zero-investment strategy based on small ETR increases yields significant abnormal returns. In sum, although interim ETRs are useful in predicting future earnings, both financial analysts and stock market investors fail to fully impound the earnings implications of interim effective tax rate changes in their decisions.

In this paper we study how the market uses the information on current and past interim earnings. Our hypothesis is that investors focus on a comparison of year-to-year changes in interim earnings. We provide further evidence on how the market acts in the face interim earnings announcements in an emerging market. The data is based on the Finnish market covering the years 1992-2002. We found, consistent with Ball and Bartov, evidence that investors underestimate the magnitude of the serial correlation in interim earnings. The results suggest that investors use, at least in part, a seasonal random walk model when forming earnings expectations.