First, since Ball and Brown (1968), it is evident that external financial reports, while in some senses
‘‘value relevant”, are not especially timely sources of information. This is hardly surprising, as stock
prices change in response to new information, but periodic financial statements provide a summary
of past transactions. Hence, studies that examine the responsiveness of stock prices around the release
of periodic financial statements typically display a low level of explanatory power (Kothari, 2001). In
other words, it cannot be claimed that periodic financial statements cause stock price changes, except
to a very small extent. Investors likely rely on the myriad of other information sources, including analysts
reports, media coverage and ad-hoc disclosures made by the firms themselves