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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27562
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| Title: | The Rewards to Meeting or Beating Earnings Expectations |
| Authors: | Bartov, Eli
Givoly, Dan
Hayn, Carla |
| Keywords: | Earnings expectations
analysts
forecasts
expectation management
earnings management
losses |
| Issue Date: | Mar-1999 |
| Series/Report no.: | Eli Bartov-02 |
| Abstract: | The paper studies the manner by which earnings expectations are met,
measures the rewards to meeting or beating earnings expectations (MBE)
formed just prior to the release of quarterly earnings, and tests
alternative explanations for this reward. The evidence supports the
claims that the MBE phenomenon has become more widespread in recent
years and that the pattern by which MBE is obtained is consistent with
both earnings management and expectation management. More importantly,
the evidence shows that after controlling for the overall earnings
performance in the quarter, firms that manage to meet or beat their
earnings expectations enjoy an average quarterly return that is higher
by almost 3% than their peers that fail to do so. While investors appear
to discount MBE cases that are likely to result from expectation or
earnings management, the premium in these cases is still significant.
Finally, the results are consistent with an economic explanation for the
premium placed on earnings surprises, namely that MBE are informative of
the firm’s future performance. |
| URI: | http://hdl.handle.net/2451/27562 |
| Appears in Collections: | Accounting Working Papers
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