The multiperiod information content of accounting earnings: confirmations and contradictions of previous earnings reports

Article Abstract:

Research was conducted to test the hypothesis that investors reevaluate announcements of earnings following post-announcement information. The research sample included 74,838 firm-quarters of 1988 Compustat data on earnings per share, earnings announcement date, and quarter-end price per share; 50,825 firm-quarters of 1988 Center for Research in Security Prices data on daily returns data; and 12,998 firm-quarters of the June 1988 Institutional Brokers Estimate System tape on earnings per share and median analyst forecast data. Research results indicate that announcement-period price reaction differs for confirming and contradicting subsamples; post-announcement drift can be considered, in part, as an implication of the seasonal random walk transition matrix; and unexpected earnings for the current quarter do not completely explain earnings-induced market reactions on the announcement date. A discussion of the multiperiod information content of accounting earnings by Wayne R. Landsman follows.

Investments, Business enterprises, Earnings per share

---

The association between stock narket responses to earnings announcements and regulation of electric utilities

Article Abstract:

Cross-sectional differences in earnings response coefficients (ERCs) between electric utilities and non-regulated firms are examined. Previous studies have documented a positive relationship between earnings persistence and ERCSs. The ERCs for the sample of utilities are found to be lower than those for the unregulated firms. The results suggest that rate regulation is possible determinant for persistence and consequently, for future earnings as well. These findings indicate that utilities have less permanent changes in cash flow resulting from unexpected earnings than do unregulated firms. Future research may be done in terms of replication using another regulated industry, comparison of the pre- and post-regulation scenario within an industry, inter-industry information dissemination and intra-industry differential regulation.

Electric services, Electric utilities

---

A nonlinear model of security price responses to unexpected earnings

Article Abstract:

The effect of absolute increases in unexpected earnings on the marginal response of stock prices to unexpected earnings is examined using a nonlinear model. The earnings response coefficient (ERC) or the constant marginal response of prices to earnings differs markedly from price-earnings ratios, a result better explained by nonlinear conditions because investors are more accurate at forecasting high-value permanent earnings than low-value earnings. Thus, as unexpected earnings decline, the permanent component of earnings surprises becomes larger. Previous studies have used a linear framework that have yielded low ERCs. Valuation theory however, suggests a negative relation between unexpected earnings and the absolute value of unexpected earnings, thereby suggesting a nonlinear relation.

Similar abstracts:

• Abstracts: Joint estimation of factor sensitivities and risk premia for the arbitrage pricing theory
• Abstracts: The market's valuation of nonreported accounting measures: retrospective reconciliations of non-U.S. and U.S. GAAP
• Abstracts: Multiple control systems, accrual accounting, and earnings management
• Abstracts: Accountability and governmental financial reporting. Capital accounting, user needs and the foundations of a conceptual framework for public sector financial reporting
• Abstracts: Goodbye to single performance indicators. Amendment to FRS 5 'Reporting the Substance of Transactions': Insurance Broking Transactions and Financial Reinsurance

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.