The primary question addressed in this study is whether firm-specific ERCs - i.e., slope coefficients obtained from time-series regressions of abnormal returns on earnings surprises - are helpful in predicting price responses to future earnings surprises. Fundamental analysis involves both...

DuPont analysis, a common form of financial statement analysis, decomposes return on net operating assets into two multiplicative components: profit margin and asset turnover. These two accounting ratios measure different constructs and, accordingly, have different properties. Prior research has...

This paper examines the consequences of expectations management for the usefulness of analyst forecasts in firm valuation. Specifically, I compare the performances of valuation models estimated using manipulated versus non-manipulated forecasts to predict firms' intrinsic values. The results...

We examine the role of investment opportunities as a determinant of the relative importance of cash flows from operations (CFO) and accruals in firm valuation. We find that at low investment-opportunity levels, CFO value-relevance increases with investment opportunities. When investment...

In this paper, we assess the degree to which ERCs reported in the literature may be attenuated due to measurement errors in the proxies for the earnings expected by the market. We use the cross-sectional dispersion of analyst forecasts as a variable to calibrate the measurement error inherent in...

We examine the stock price benefit of meeting or beating earnings expectations. Using a general methodology, we find no compelling evidence that the timing of earnings news benefits firms' stock returns. Our results appear to overturn the findings of previous authors who, using less general...

Manipulation of earnings or analyst earnings expectations is costly to firms. Manipulators of earnings and/or analyst earnings expectations therefore are likely to report earnings that precisely meet or narrowly beat analyst earnings forecasts, resulting in a zero or small positive earnings...

This paper examines whether industry efforts to increase uniformity and improve transparency of a non-GAAP performance measure change manager behavior and market perceptions. We find that the frequency of REITs meeting or beating analysts' expectations of funds from operations (FFO) decreased...

It has been well-documented that prices respond quickly, if not completely, to the information in quarterly earnings announcements. In this paper we show that after conditioning on past earnings surprises, companies that meet analyst expectations have positive (negative) returns following a...

Using a large database of analysts' target prices, we examine short-term market reactions to target price announcements and long-term co-movement of target and stock prices. We find a significant market reaction to the information contained in analysts' target prices, both unconditional and...