Speaker：Guochang ZHANG, Professor at the University of Hong Kong
Time: 14:30 p.m., May 14, 2026
Venue: Room 301, Building 12, Wushan Campus
Abstract
Blankespoor, deHaan, and Marinovic (2020) distinguish between awareness, acquisition, and integration in information processing. We examine how frictions in integrating earnings news affect market efficiency. Guided by real-options—based valuation, we predict that equity value is a convex function of earnings, with convexity varying with firms’ investment opportunities and adjustment costs. Using quarterly earnings announcements for U.S. firms from 1980-2022, we find that investors react promptly to the direction and magnitude of earnings news, indicating low awareness and acquisition frictions. However, initial price reactions do not account for differences in convexity, suggesting difficulties in integrating earnings through nonlinear valuation mappings. Prices subsequently adjust toward theoretical benchmarks, generating predictable return patterns that vary with valuation convexity. The integration of earnings news in capturing convexity effects occurs faster when information environments are richer, including larger firms, non-busy announcement days, greater analyst coverage, and higher institutional ownership. Overall, our results highlight that frictions in integrating earnings signals—due to nonlinear (real-options) effects—are an important source of market inefficiency.
Biography
Guochang Zhang is the Chung Hon-Dak Professor in Accounting at the University of Hong Kong. He previously held academic positions at the Hong Kong University of Science and Technology and The University of Waterloo, Canada. He received a Bachelor degree (Engineering) from Shanghai Jiaotong University, and an MSc (Accounting) and a PhD (Finance) from the University of British Columbia. His research interests include accounting-based valuation, economic consequences of corporate disclosure, earnings management, and design of financial reporting standards. He has published papers in top academic journals including Accounting Review, Contemporary Accounting Research, Journal of Accounting and Economics, Journal of Accounting Research, Review of Accounting Studies, and Management Science. His monograph “Accounting Information and Equity Valuation: Theory, Evidence, and Applications” has been used as teaching materials for doctoral and master programs and executive training. He previously served as an Associate Editor of European Accounting Review, a member of the Financial Reporting Standards Committee of the Hong Kong Institute of Certified Public Accountants, and an independent non-executive director of a listed company.
