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Does Earnings Guidance Affect Market Returns The Nature And Information Content Of Aggregate Earnings Guidance
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Book Synopsis Does Earnings Guidance Affect Market Returns? The Nature and Information Content of Aggregate Earnings Guidance by : Carol Anilowski Cain
Download or read book Does Earnings Guidance Affect Market Returns? The Nature and Information Content of Aggregate Earnings Guidance written by Carol Anilowski Cain and published by . This book was released on 2007 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate whether earnings guidance affects aggregate stock returns through its effects on expectations about overall earnings performance and/or aggregate expected returns. We find that aggregate guidance, especially relative levels of quarterly downward guidance, is associated with analyst- and time-series-based measures of aggregate earnings news. We find more modest evidence that guidance, again, largely downward guidance, is associated with market returns - market returns appear to respond to guidance toward the end of each calendar quarter, when most earnings preannouncements are released, and there is some evidence that firm-level guidance affects market returns in short windows around its release.
Book Synopsis Aggregate Earnings, Stock Market Returns and Macroeconomic Activity by : Lakshmanan Shivakumar
Download or read book Aggregate Earnings, Stock Market Returns and Macroeconomic Activity written by Lakshmanan Shivakumar and published by . This book was released on 2007 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: Anilowski, Feng and Skinner (Journal of Accounting and Economics, 2006, this issue) examine the relationship between aggregate earnings guidance, aggregate earnings news and market returns. They provide evidence that changes in aggregate proportions of downward or upward earnings guidance are associated with aggregate earnings news and weakly associated with market returns. However, the study is unable to establish causality or the precise nature of the relationship between aggregate earnings guidance and market returns. To better understand the relationship, this paper analyses the relation between aggregate earnings, stock market returns and the macroeconomy. I empirically document that aggregate earnings primarily contain information about future inflation. This inflation information in aggregate earnings causes aggregate earnings to be negatively correlated with stock returns. The paper concludes with suggestions for future research.
Book Synopsis Is Guidance a Macro Factor? the Nature and Information Content of Aggregate Earnings Guidance by : Carol Anilowski Cain
Download or read book Is Guidance a Macro Factor? the Nature and Information Content of Aggregate Earnings Guidance written by Carol Anilowski Cain and published by . This book was released on 2007 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although a great deal of research documents the information content of management earnings forecasts at the firm level, there is little research on the informativeness of aggregate earnings guidance. We argue that aggregate earnings guidance is potentially informative at the market/economy level through its effects on expectations about market-level expected future cash flows and expected returns. We find that aggregate guidance, especially relative levels of quarterly downward guidance, is associated with analyst- and time-series-based measures of aggregate earnings news. We also find some evidence that guidance - again, largely downward guidance - is associated with market returns.
Book Synopsis The Information Content of Guidance and Earnings by : Jonathan A. Milian
Download or read book The Information Content of Guidance and Earnings written by Jonathan A. Milian and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I compare the information content of quarterly earnings guidance and quarterly earnings by examining their associations with current and future stock returns when the two signals are bundled at earnings announcements. At the bundled announcement, I find a significantly stronger association between announcement returns and guidance news. From the day after the bundled announcement through the next earnings announcement, both signals generate abnormal return drifts of about 200 basis points. However, the timing of the post-announcement returns differs considerably. For guidance, about 50% of the post-announcement drift occurs at the next earnings announcement. In contrast, for earnings, about 20% of the preceding drift reverses at the next earnings announcement. Investor ignorance of the drift following guidance news coupled with a fixation on post-earnings announcement drift potentially explains this surprising difference in the timing of the post-announcement returns. Overall, this study indicates that bundled quarterly earnings guidance contains more information than quarterly earnings and that investors incorrectly overweight the earnings news and underweight the guidance news during the post-announcement period until the next earnings announcement.
Book Synopsis Is the U.S. Unique? International Evidence on the Aggregate Earnings-Returns Association by : Lindsey A. Gallo
Download or read book Is the U.S. Unique? International Evidence on the Aggregate Earnings-Returns Association written by Lindsey A. Gallo and published by . This book was released on 2018 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We exploit differences in institutional and macroeconomic environments to shed light on what drives variation in the aggregate earnings-returns relation over time within the U.S. and across countries. We find that both intertemporal and cross-country variation in the aggregate earnings-returns association are driven primarily by two factors, namely, the monetary policy news conveyed in aggregate earnings and the market reaction to that news, which suggest that the strength of the discount rate news channel plays an important role in explaining the aggregate earnings-returns relation both within and outside of the U.S. We further find that institutional characteristics have a significant effect on the information content of aggregate earnings and hence on the aggregate earnings-returns association--aggregate earnings are more informative about policy changes in countries with stronger investor protection and greater accounting transparency. Overall, our study provides new evidence on what drives the aggregate earnings-returns relation across the globe.
Book Synopsis Aggregate Earnings and Market Returns by : Wen He
Download or read book Aggregate Earnings and Market Returns written by Wen He and published by . This book was released on 2016 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Kothari, Lewellen and Warner (2006) document that in the U.S. market aggregate earnings changes are negatively related to contemporaneous market returns. This is puzzling given the well-documented evidence that firm-level earnings changes are positively related to stock returns. In this study we use a sample of 28 countries to provide international evidence on this important issue. In pooled cross-country and time-series regressions, we find that aggregate earnings changes are positively associated with contemporaneous market returns. When we run time-series regressions of market returns on aggregate earnings changes for each country, we find only four countries have negative coefficients for aggregate earnings changes and none of these negative coefficients are statistically significant. This evidence contrasts the U.S. evidence. Furthermore aggregate earnings exhibits substantial persistence, suggesting current earnings convey information about future earnings. Finally we find that the earnings-returns relation at aggregate becomes less positive in countries with more transparent accounting disclosure. This result supports the argument proposed by Sadka and Sadka (2009) that predictability of aggregate earnings leads to the negative relation between aggregate earnings and market returns in the U.S.
Book Synopsis The End of Accounting and the Path Forward for Investors and Managers by : Baruch Lev
Download or read book The End of Accounting and the Path Forward for Investors and Managers written by Baruch Lev and published by John Wiley & Sons. This book was released on 2016-06-14 with total page 268 pages. Available in PDF, EPUB and Kindle. Book excerpt: An innovative new valuation framework with truly useful economic indicators The End of Accounting and the Path Forward for Investors and Managers shows how the ubiquitous financial reports have become useless in capital market decisions and lays out an actionable alternative. Based on a comprehensive, large-sample empirical analysis, this book reports financial documents' continuous deterioration in relevance to investors' decisions. An enlightening discussion details the reasons why accounting is losing relevance in today's market, backed by numerous examples with real-world impact. Beyond simply identifying the problem, this report offers a solution—the Value Creation Report—and demonstrates its utility in key industries. New indicators focus on strategy and execution to identify and evaluate a company's true value-creating resources for a more up-to-date approach to critical investment decision-making. While entire industries have come to rely on financial reports for vital information, these documents are flawed and insufficient when it comes to the way investors and lenders work in the current economic climate. This book demonstrates an alternative, giving you a new framework for more informed decision making. Discover a new, comprehensive system of economic indicators Focus on strategic, value-creating resources in company valuation Learn how traditional financial documents are quickly losing their utility Find a path forward with actionable, up-to-date information Major corporate decisions, such as restructuring and M&A, are predicated on financial indicators of profitability and asset/liabilities values. These documents move mountains, so what happens if they're based on faulty indicators that fail to show the true value of the company? The End of Accounting and the Path Forward for Investors and Managers shows you the reality and offers a new blueprint for more accurate valuation.
Book Synopsis Aggregate Earnings, Forecasts and Revisions by : Hamish Campbell Macalister
Download or read book Aggregate Earnings, Forecasts and Revisions written by Hamish Campbell Macalister and published by . This book was released on 2011 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: I investigate the information in aggregated US equity analysts' earnings forecasts. Despite a voluminous body of research evaluating the information in, and characteristics of, equity analysts' forecasts, relatively little is known regarding aggregated forecasts. However, Kothari, Lewellen and Warner (2006) demonstrate how estimated relationships between, for example, earnings and returns may differ markedly at the aggregate level compared with the individual stock level. I generate time series of aggregated forecast earnings, aggregated forecast revisions and aggregated realized earnings for the period extending from the first quarter of 1979 through to the last quarter of 2009. These variables are employed in three examinations of aggregated earnings expectations. Firstly, prior research indicates significant information in analysts' forecasts for future realized earnings, and strong positive correlation between realized earnings and indicators of macroeconomic activity. I therefore hypothesize significant information in aggregated analysts' forecasts for future realized economic activity. Secondly, I investigate the informational efficiency of analysts' forecasts with respect to realized macroeconomic variables, and implications of earnings revision predictability for return predictability. Thirdly, I employ aggregated earnings revisions as proxies for market earnings surprise in tests of cash flow and discount rate effects in market returns. I find evidence of statistically significant information for future US industrial production growth in aggregated analysts' forecasts, the magnitude of which is a partial function of earnings smoothing by management, firm size and earnings cyclicality. I also find evidence of systematic underreaction by analysts to realized macroeconomic factors, resulting in revision predictability which in turn is able to explain significant systematic variation in future industry returns. In addition, my results suggest that the negative relationship between aggregated earnings surprise and contemporaneous returns identified by Kothari et al. (2006) is at least partially a product of the period they evaluate. In robustness tests employing both aggregated realized earnings and aggregated forecast revisions, I find evidence of positive (albeit insignificant) relationships between these proxies for earnings surprise and contemporaneous market returns. My results do not support the notion of a discount rate effect dominating a cash flow effect at the aggregate level.
Book Synopsis Advances in Quantitative Analysis of Finance and Accounting (New Series) Vol．12 by : Cheng F. Lee
Download or read book Advances in Quantitative Analysis of Finance and Accounting (New Series) Vol．12 written by Cheng F. Lee and published by Center for PBBEFR & Airiti Press. This book was released on 2014-01-01 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Advances in Quantitative Analysis of Finance and Accounting (New Series) is an annual publication designed to disseminate developments in the quantitative analysis of finance and accounting. The publication is a forum for statistical and quantitative analyses of issues in finance and accounting as well as applications of quantitative methods to problems in financial management, financial accounting, and business management. The objective is to promote interaction between academic research in finance and accounting and applied research in the financial community and the accounting profession.
Book Synopsis Accounting for M&A by : Amir Amel-Zadeh
Download or read book Accounting for M&A written by Amir Amel-Zadeh and published by Routledge. This book was released on 2020-04-29 with total page 331 pages. Available in PDF, EPUB and Kindle. Book excerpt: Spending on M&A has, in aggregate, grown so fast that it has even overtaken capital expenditure on increasing and maintaining physical assets. Yet McKinsey, the leading management consultancy, reports that "Anyone who has researched merger success rates knows that roughly 70% fail". The idea that businesses might be using huge and increasing sums of shareholders’ money for an activity that more often than not leads to failure calls into question the information on which M&A decisions are based. This book presents statistical studies, case material, and standard-setters’ opinions on company accounting before, during, and after M&A. It documents the manipulation of annual accounts by acquirers ahead of share for share bids, biased forecasts of post-merger earnings by bidders, and devices to flatter earnings when recording the deal. It explores the challenges for standard-setters in regulating information flows during and after M&A, and for account-users wishing to learn from financial statements how a deal has affected performance. Drawing on a wide range of international examples, this readable book is targeted not just at accounting specialists but at anyone who is comfortable reading the serious financial press, is intrigued by what is going on in the massive M&A market, and is concerned with achieving better-informed M&A. As such it might be of particular interest to business executives, lawyers, bankers, and investors involved in M&A as well as graduate students interested in researching or learning about the role of accounting in M&A.
Book Synopsis Earnings Guidance after Regulation Fd by : Ronen Feldman
Download or read book Earnings Guidance after Regulation Fd written by Ronen Feldman and published by . This book was released on 2008 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates market reactions to voluntary earnings guidance provided by managers after the enactment of Regulation FD, which requires companies to disseminate material news to all investors simultaneously. More managers now issue their guidance to the public instead of disclosure to a selective group of analysts, in conformity with Regulation FD. We examine a very large set of earnings guidance disclosures based on identification of these announcements using text mining techniques.Our results indicate that guidance provided with the disclosure of earnings is not associated with significant market reactions, but guidance provided between earnings releases is associated with significant negative reactions. We further show that market reactions are consistent with the trend implied by management even when it is in the form of qualitative disclosure. Finally, we show that market reactions are stronger (more negative, typically) for NASDAQ firms than NYSE or AMEX firms, larger firms, and when the disclosure involves revenues and not earnings.
Book Synopsis Directional Aggregate Earnings News and Market Returns by : Debjeet Pradhan
Download or read book Directional Aggregate Earnings News and Market Returns written by Debjeet Pradhan and published by . This book was released on 2014 with total page 158 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, I examine the properties of positive and negative aggregate earnings changes and how they relate to contemporaneous market returns. I find that the negative relationship between aggregate earnings news and market returns, documented in Kothari et al. (2006) and Cready and Gurun (2010), is driven primarily by bad news observations. I also find that negative aggregate earnings changes mean revert in the two quarters following the negative aggregate earnings changes quarter. Market returns increase contemporaneously with negative aggregate earnings news, suggesting that investors incorporate the expectation of mean reversion for negative aggregate earnings changes in subsequent quarters. As a result, the aggregate earnings news market returns relationship is negative when aggregate earnings news is negative. When aggregate earnings news is positive, I find that market returns are positively associated with aggregate earnings news. Since aggregate earnings news consists of cash flow and discount rate news components, each having an opposite direction effect on market return, the cash flow news component dominates the discount rate news component when aggregate earnings news is positive, while the discount rate news component dominates the cash flow news component when aggregate earnings news is negative.
Book Synopsis Earnings Guidance and Market Uncertainty by : Jonathan L. Rogers
Download or read book Earnings Guidance and Market Uncertainty written by Jonathan L. Rogers and published by . This book was released on 2011 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effect of disclosure on uncertainty by examining how management earnings forecasts affect stock market volatility. Using implied volatilities from exchange-traded options prices, we find that management earnings forecasts, on average, increase short-term volatility. This effect is attributable to forecasts that convey bad news, especially when firms release forecasts sporadically (as opposed to on a routine basis). In the longer run, market uncertainty declines after earnings are announced regardless of whether there is a preceding earnings forecast. This decline is mitigated when the firm issues a forecast that conveys negative news.
Book Synopsis Integrated Reporting by : Cristiano Busco
Download or read book Integrated Reporting written by Cristiano Busco and published by Springer Science & Business Media. This book was released on 2013-11-27 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book focuses on Integrated Reporting as a contemporary social and managerial innovation where a number of initiatives, organizations and individuals began to converge in response to the need for a consistent, collaborative and internationally accepted approach to redesign corporate reporting. Integrated Reporting is a process that results in communication of the annual “integrated report” which describes value creation over time. An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term. This book offers a fresh perspective with expert contributions focusing on both the theoretical underpinnings and the practical challenges for the future of corporate reporting.
Book Synopsis Market Uncertainty and Earnings Guidance by : Anna Agapova
Download or read book Market Uncertainty and Earnings Guidance written by Anna Agapova and published by . This book was released on 2018 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test a theory about ambiguity surrounding the distribution of fundamental values to determine how market uncertainty affects earnings guidance perception and behavior. We find a more pronounced negative share price response to negative earnings guidance and a lower likelihood that management issues negative guidance under conditions of greater market uncertainty. Yet, we also find that the share price response to positive guidance is not related to the level of market uncertainty, while the likelihood of issuing positive guidance decreases with market uncertainty. The asymmetric effects of market uncertainty on earnings guidance perception and behavior support the ambiguity based pricing theories.
Book Synopsis Finance and Strategy by : Belen Villalonga
Download or read book Finance and Strategy written by Belen Villalonga and published by Emerald Group Publishing. This book was released on 2014-09-23 with total page 392 pages. Available in PDF, EPUB and Kindle. Book excerpt: The boundaries between CEO and CFO are blurred in the fields of strategy and finance. This volume fills this gap by discussing the main subdivisions of strategy research - corporate strategy and business strategy - and the main subdivisions of finance research - corporate finance and capital markets.
Book Synopsis Guidance, Guidance and Guidance by : Naqiong Tong
Download or read book Guidance, Guidance and Guidance written by Naqiong Tong and published by . This book was released on 2009 with total page 191 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation proposes and examines three research questions on quarterly earnings guidance on its discontinuity and revival. In particular, it examines the impact of corporate governance on a firm's decision to stop quarterly earnings guidance, the impact of its discontinuity on a firm's investment decisions, and why a firm restarts providing quarterly earnings guidance. Corporate governance is measured by board independence, institutional ownership, types of institutional ownership and CEOs compensation. A firm's long term investments are measured by capital and Research and Development (R & D) expenditure. Theories of firm performance and earnings expectation management are used to explain a firm's decision to restart. Using an industry-year-quarter matched sample of 1610 firms (the STOPPERS and the MAINTAINERS) from 2001 to 2006, this study finds that a firm is more likely to stop quarterly earnings guidance when its board is more independent, institution ownership is lower, the dedicate institution ownership is higher and the level of cash proportion of CEOs compensation is higher. It also finds a firm is more likely to stop when both past and expected future earnings performances are poorer or more difficult to predict or the management is more optimistic or litigation risk is lower. Second, this study finds that the STOPPERS have higher levels of capital expenditure and R & D expenditure in the subsequence years following the stop event (one and two years). The change levels of the STOPPERS are higher than that of the MAINTAINERS. It implies that the quarterly earnings guidance has adverse impact on firm's long term investments. Third, using an industry-year-quarter matched sample of 342 firms (the RESUMERS and the NONRESUMERS) from 2004 to 2008, it finds that a firm is more likely to restart when its earnings and market return improve, or when the prevailing market expectations are higher to beat/meet. In addition, it finds that the R & D expenditure of the RESUMERS are higher than that of the NONRESUMERS in the three years before the restart event, which implies that the RESUMERS increase R & D and capital expenditure after the stoppage, and improve the firm performance.
