Profit warnings and stock returns: Evidence from moroccan stock exchange

TL;DR

This study investigates the impact of profit warnings on stock returns in the Moroccan stock exchange, finding that negative abnormal returns are more pronounced for qualitative warnings than quantitative ones.

Contribution

First empirical analysis of profit warning effects on Moroccan stocks, highlighting differences between qualitative and quantitative warnings in a developing market context.

Findings

Negative abnormal returns on warning dates

Qualitative warnings lead to larger negative returns

Evidence supports market reaction to profit warnings in Morocco

Abstract

There is an important literature focused on profit warnings and its impact on stock returns. We provide evidence from Moroccan stock market which aims to become an African financial hub. Despite this practical improvement, academic researches that focused on this market are scarce and our study is a first investigation in this context. Using the event study methodology and a sample of companies listed in Casablanca Stock Exchange for the period of 2009 to 2016, we examined whether the effect of qualitative warning is more negative compared to quantitative warnings in a short event window. Our empirical findings show that the average abnormal return on the date of announcement is negative and statistically significant. The magnitude of this negative abnormal return is greater for qualitative warnings than quantitative ones.