Abstract:
This study investigates the complex relationship between free float and market reactions to earnings surprises within the context of the Thai stock market, casting light on the role of free float in influencing market efficiency and investor behavior. The study examines the Efficient Market Hypothesis (EMH), which states that stock prices reflect all available information, making consistent market outperformance difficult. However, it acknowledges that market inefficiencies can occur, with earnings surprises as one possible source. The study investigates how the level of free float or the number of shares available for trading impact the speed and precision of market adjustments to earnings surprises. A limited free float could have an impact on stock prices and market efficiency. This phenomenon is investigated using a sample of Thai stock market data from 2012 to 2019, such as earnings surprise, stock price, and free float levels. Low free float stocks have a significant impact on cumulative abnormal returns following earnings surprises, with a distinct pattern of initial enthusiasm and potential overreactions. In contrast, stocks with a high free float react quickly to negative news, resulting in greater price declines. These findings have considerable implications for market participants and researchers, highlighting the significance of incorporating free float into stock market dynamics analyses. This study provides valuable insights into the interaction between free float, market efficiency, and investor behavior in the context of earnings surprises on the Thai stock market.
