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Perverse market rewards for meeting or beating earnings expectations

Title
Perverse market rewards for meeting or beating earnings expectations
Author
송창준
Keywords
Earnings expectations; earnings management; earnings growth; expectations management; institutional investors
Issue Date
2018-01
Publisher
ROUTLEDGE JOURNALS
Citation
ASIA-PACIFIC JOURNAL OF ACCOUNTING & ECONOMICS, v. 25, no. 1-2, page. 57-74
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.
URI
https://www.tandfonline.com/doi/full/10.1080/16081625.2016.1263158https://repository.hanyang.ac.kr/handle/20.500.11754/116939
ISSN
1608-1625; 2164-2257
DOI
10.1080/16081625.2016.1263158
Appears in Collections:
GRADUATE SCHOOL OF BUSINESS[S](경영전문대학원) > BUSINESS ADMINISTRATION(경영학과) > Articles
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