Is corporate bond market (in)attentive to earnings news on busy reporting days?

Abstract

This study explores investor attention in the corporate bond market, which is largely dominated by institutional investors. Specifically, we examine how bond investors respond to earnings news when faced with competing signals. Analysing both contemporaneous and subsequent bond returns, we find that bond price reactions to earnings announcements are not attenuated on busy reporting days and that there is no evidence of return continuation or reversal in the post-announcement window. These findings are robust to alternative proxies for limited investor attention and suggest that bond investors, on average, remain attentive to earnings news even on busy reporting days. Cross-sectional analyses indicate that bond investors' reliance on private information may help explain why they are not distracted by competing earnings signals. Collectively, our results suggest that bond investors are less constrained by limited attention than previously thought.