Investigating the Relationship between the Abnormal Returns of the First Earnings Announcement and the Last Earnings Announcement with the Mediation of Product Market Competition

The current research sought to determine the impact of market competition and product substitution on the relationship between the abnormal return of the first earnings announcement and the last earnings announcement (as a basis of the information content of the earnings announcement). The research method was applied and the statistical method used included the multivariate regression model. To test the hypotheses of the research, the financial data of a statistical sample including 112 companies admitted to the Tehran Stock Exchange from 2013 to 2016 were collected. The results of the hypothesis test showed that there was no significant relationship between the abnormal return of the first profit announcement and the abnormal return of the last profit announcement; in addition, the product market competition, product substitution, the difference in the direction of the abnormal return of the first and the abnormal return of the last profit announcement, and the loss report could not explain the relationship between the abnormal return of the first profit announcement and the impact of the abnormal return of the last profit announcement. It appears that the delay in the announcement of profits and imitation of the latest profit forecast could be reasons for rejecting the research hypotheses. In addition, the inefficiency of the Tehran Stock Exchange market could be considered a reason for the lack of information content in the announcement of profits, and the abnormal returns were caused by other factors. In other words, the lack of effectiveness of abnormal returns can indicate that the competition of the product market does not have the necessary regulatory efficiency and the Iranian stock market tends towards monopoly or multilateral monopoly.