The Role of Institutional Investors Herding on the Formation and Intensification of PEAD in the Short Period

There have been many researches in the world about Post Earning Announcement Drift (PEAD). Most of the findings support the existence of excess abnormal returns in case of benefit from PEAD. In this research, the existence of PEAD in Tehran Stock Exchange companies during the period from 2009 to 2021 was investigated, and for the first time, the role of the herding behavior of institutional investors in the formation and intensification of PEAD was investigated. Different percentages of earning adjustment were divided into 6 groups, 3 groups were related to negative adjustment and 3 groups were related to positive earning adjustment. Also, the type of institutional behavior after adjusting earning was divided into four categories: strong herding behavior of selling, weak herding behavior of selling, strong herding behavior to buying and weak herding behavior of buying. The significance of the results was assessed using the Newey-West t test, and the results are as follows: PEAD exists for a short period on the Tehran Stock Exchange. Also, when the institutional investors are the buyer for positive earning adjustment and and sellers for negative earning adjustment, especially for groups of negative 40% to positive 40% earning adjustment, the possibility of obtaining positive abnormal returns is strengthened.