Listed companies in Korea are required to immediately disclose unaudited preliminary earnings number when they identify the material change in the current year's sales (or net income)compared to prior year's sales (or net income) based on Regulation on Disclosure of Listed Companies. Previous research in the area of preliminary earnings announcement suggests that many firms overstate preliminary earnings compared to actual earnings because they are not audited and focuses on market responses to firms’ preliminary earnings announcement and their subsequent modification in preliminary earnings. This study extends this line of research by examining whether the announcement of and the modification in preliminary earnings affects market participants’ perception on the quality of reported earnings. Specifically, this study tests the association between discretionary accruals and stock return in the situation where firms announce and modify their preliminary earnings, using a sample of listed companies from 2001-2010. Unlike other components of earnings, discretionary accruals are more subjective and reflect a higher degree of managerial judgment, thus they are likely to be affected by management opportunistic behavior. The empirical results show that (1) the association between discretionary accruals and stock return is lower for firms disclosing their preliminary earnings than firms not disclosing their preliminary earnings, (2) the association between discretionary accruals and stock return is lower for firms modifying their preliminary earnings among firms disclosing their preliminary earnings, (3) the association between discretionary accruals and stock return is lower for firms modifying their preliminary earnings in large amount among firms disclosing their preliminary earnings, and (4) the association between discretionary accruals and stock return is not affected by audit quality among firms disclosing their preliminary earnings. Thus, these results indicate that market values discretionary accruals less because of potentially aggressive and opportunistic reporting behavior of discretionary accruals by managers before firms disclose preliminary earnings, and market's undervaluation on discretionary accruals continues even after they subsequently modify preliminary earnings during the annual audit process. There is no penalty for announcing unaudited preliminary earnings in an overstated amount. It is desirable to improve an institutional device governing a practice of preliminary earnings announcement in order to enhance earnings quality and to restore credibility of earnings number.