Continuous Disclosure Requirements and the Investor Distraction Hypothesis

The magnitude of the short term market reaction to news announcements is adversely affected by the total number of announcements that day. We argue that the total number of announcements creates a level of distraction that results in a significant underreaction on high distraction days. The relative order in which announcements are released during the day also plays a role in the market reaction. The delay in the market reaction is not caused by either additional information releases by the company or by analyst recommendation revisions. Our results emphasize the importance of actions taken in the Australian market to reduce the impact of investor distraction that could be emulated in other markets, such as labeling certain announcements as market sensitive and using trading halts to attract investor attention.