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Perverse market rewards for meeting or beating earnings expectations
- Issue Date
- Dec-2018
- Publisher
- ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
- Keywords
- Earnings expectations; earnings management; earnings growth; expectations management; institutional investors
- Citation
- ASIA-PACIFIC JOURNAL OF ACCOUNTING & ECONOMICS, v.25, no.1-2, pp.57 - 74
- Indexed
- SSCI
SCOPUS
- Journal Title
- ASIA-PACIFIC JOURNAL OF ACCOUNTING & ECONOMICS
- Volume
- 25
- Number
- 1-2
- Start Page
- 57
- End Page
- 74
- ISSN
- 1608-1625
- Abstract
- Approximately 47 (43) percent of the observations in our sample receive negative (positive) market rewards when they meet (miss) earnings expectations. We define these phenomena as perverse market rewards (PMR). We find that the likelihood of PMR is increased when (i) firms use earnings and/or expectations management; (ii) earnings growth is negative (positive) when earnings expectations are met (missed); and (iii) ownership by transient (dedicated) institutional investors is high when earnings expectations are met (missed). In addition, we find that, when earnings expectations are met (missed), PMR appears to be an indicator of bad (good) future stock performance. Our study demonstrates that gratuitous participation in the numbers game' does not always result in the desired market rewards.
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Related Researcher
- Song, Chang Joon
- SCHOOL OF BUSINESS (SCHOOL OF BUSINESS ADMINISTRATION)