OPTIONS MARKETS AND THE INFORMATION-CONTENT OF ACCOUNTING EARNINGS RELEASES

This study documents that the information content of firms' accounting earnings releases is lower, on average, after exchange-traded options are listed on their stocks. The results are consistent with predictions that: (i) options provide investors with a more cost-effective tool for trading on information, so that (ii) more private information is produced about these firms after options listing, so that (iii) the information in earnings releases is preempted to a greater extent after options listing. However, because options listing is endogenous, it is difficult to infer from this evidence that options listing causes these informational changes. © 1990.