Journal ArticleDOI
The Materiality of Earnings Surprise
TLDR
The authors used First Call Corp. earnings surprise data and market-adjusted stock returns for the seven-day period surrounding each of about 22,000 annual earnings announcements from 1992-1997 to address several questions recently posed by SEC officials.Abstract:
This study uses First Call Corp. earnings surprise data and market-adjusted stock returns for the seven-day period surrounding each of about 22,000 annual earnings announcements from 1992-1997 to address several questions recently posed by SEC officials. We find that mean and median stock returns of portfolios ranked on earnings surprise magnitudes typically have the same sign as the surprise, but have the opposite signs for about 45% of observations comprising each portfolio. We also find that for a given absolute surprise magnitude, absolute price response is inversely related to the dispersion of analysts' forecasts.read more
Citations
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Journal ArticleDOI
Earnings Management: Reconciling the Views of Accounting Academics, Practitioners, and Regulators
TL;DR: In this paper, the authors address the fact that accounting academics often have very different perceptions of earnings management than do practitioners and regulators, and argue that each of these groups may benefit from some rethinking of their views about earnings management.
Journal ArticleDOI
Client Importance, Nonaudit Services, and Abnormal Accruals
TL;DR: In this article, the authors investigate the relationship between abnormal accruals and client importance and find no statistically significant association between the two measures of client importance, and they also find that auditor incentives to compromise independence increase with the extent of client opportunities and incentives to manage earnings, and decrease with the strength of corporate governance and auditor expertise.
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Does Meeting Expectations Matter? Evidence from Analyst Forecast Revisions and Share Prices
Ron Kasznik,Maureen F. McNichols +1 more
TL;DR: In this paper, the authors investigate whether firms achieve greater share value by meeting analysts' expectations and find that the market rewards firms for meeting expectations, while the incremental future abnormal earnings realized by these firms are insufficient to explain the market reward.
Journal ArticleDOI
Management of Earnings and Analysts' Forecasts to Achieve Zero and Small Positive Earnings Surprises
David Burgstahler,Michael Eames +1 more
TL;DR: In this paper, the authors provide empirical evidence of both upward management of reported earnings and downward management of analysts' forecasts to achieve zero and small positive earnings surprises, respectively, by analyzing both operating cash flow and discretionary accruals components of earnings.
Journal ArticleDOI
Does Meeting Earnings Expectations Matter? Evidence from Analyst Forecast Revisions and Share Prices
Ron Kasznik,Maureen F. McNichols +1 more
TL;DR: This article investigated whether the market rewards firms meeting current period earnings expectations, and whether any such reward reflects the implications of meeting expectations in the current period for future earnings or reflects a distinct market premium.
References
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Journal ArticleDOI
An analysis of intertemporal and cross-sectional determinants of earnings response coefficients
TL;DR: In this article, the authors predict and document evidence that the earnings response coefficient is a function of riskless interest rates and the riskiness, growth and/or persistence of earnings.
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Earnings Surprises, Growth Expectations, and Stock Returns or Don't Let an Earnings Torpedo Sink Your Portfolio
TL;DR: In this article, the inferior returns to growth stocks relative to value stocks are the result of overoptimistic expectations about future earnings performance, which are corrected through subsequent negative earnings surprises.
Journal ArticleDOI
Earnings Surprises, Growth Expectations, and Stock Returns: Don't Let an Earnings Torpedo Sink Your Portfolio
TL;DR: In this paper, the authors show that the realized returns of growth stocks have been low relative to other stocks, and that this phenomenon is explained by a large and asymmetric response to negative earnings surprises for growth stocks.
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The Association between Unsystematic Security Returns and the Magnitude of Earnings Forecast Errors
Journal ArticleDOI
Information in prices about future earnings
S.P. Kothari,Richard G. Sloan +1 more
TL;DR: In this paper, leading-period returns in price-earnings regressions were used to reduce the bias of returns on contemporaneous earnings changes and the resulting estimated earnings response coefficient magnitudes suggest that the capital market, on average, views earnings changes to be largely permanent.