Please use this identifier to cite or link to this item:
Title: Does the stock market see a zero or small positive earnings surprise as a red flag?
Authors: Keung, E. 
Lin, Z.-X.
Shih, M. 
Issue Date: 2010
Citation: Keung, E., Lin, Z.-X., Shih, M. (2010). Does the stock market see a zero or small positive earnings surprise as a red flag?. Journal of Accounting Research 48 (1) : 105-135. ScholarBank@NUS Repository.
Abstract: This study shows that firms collectively incur a cost for managing earnings and analyst expectations to meet earnings forecasts. We compare the coefficient in the regression of abnormal stock returns on earnings surprise (the earnings response coefficient [ERC]) across ranges of earnings surprises. The ERC for earnings surprises in the range [0, 1¢] is significantly lower than ERCs for earnings surprises in adjacent ranges for firm-quarters in the early and mid 2000s, but not for those in the 1990s. The results are robust to controlling for the sign of estimated discretionary accruals and the trajectory of analyst earnings forecasts. We further find that investors are right to be skeptical about earnings surprises in the range [0, 1¢]. The relation of future earnings surprise with current earnings surprise is more negative for current earnings surprises in that range than for those in any other range. Evidence also suggests analysts react negatively to earnings surprises in that range. © 2009 University of Chicago on behalf of the Accounting Research Center.
Source Title: Journal of Accounting Research
ISSN: 00218456
DOI: 10.1111/j.1475-679X.2009.00354.x
Appears in Collections:Staff Publications

Show full item record
Files in This Item:
There are no files associated with this item.


checked on Jun 6, 2023


checked on Jun 6, 2023

Page view(s)

checked on Jun 8, 2023

Google ScholarTM



Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.