Information Content of Earnings for Write-Off Firms

Abstract

Asset write－off has drawn the attention of researchers. Prior studies on unusual charge have focused on the market reaction to the announcement of the charge. In contrast, this paper investigates the market reaction to the earnings announcement in the following period. At this stage of research, I find strong evidence that the market reaction to the earnings announcement is asymmetric. Firms respond more positively to positive earnings surprise in the year following large write－offs.