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There is reliable evidence that managers smooth their reported earnings. If some firms manage earnings downwards (upwards) when they experience large positive (negative) earnings shocks and if investors have cognitive limits or are inattentive, then it is plausible that the post-earnings...
Persistent link: https://www.econbiz.de/10013135949
This paper examines the effect of income smoothing on information uncertainty, stock returns, and cost of equity. I show that income smoothing through both total accruals and discretionary accruals tends to reduce firms' information uncertainty, as measured by stock return volatility, analyst...
Persistent link: https://www.econbiz.de/10012938674
We examine the role of concurrent information in the striking increase in investor response to earnings announcements from 2001 to 2016, as measured by return variability and volume following Beaver (1968). We find management guidance, analyst forecasts, and disaggregated financial statement...
Persistent link: https://www.econbiz.de/10011873121
Firms invest non-trivial resources to avoid paying taxes. One of the presumed incentives for doing so is that it should increase the value of the firm. Surprisingly, a large number of studies find that tax expense is positively related to stock returns, suggesting that paying more taxes is good...
Persistent link: https://www.econbiz.de/10012913475
We investigate the joint hypothesis that a) tax expense contains information about core profitability that is incremental to reported earnings and b) that information is reflected in stock prices with a delay. We find that seasonally-differenced quarterly tax expense, our proxy for tax expense...
Persistent link: https://www.econbiz.de/10013135166
We show that the cost of trading on negative news, relative to positive news, increases before earnings announcements. Our evidence suggests that this asymmetry is due to financial intermediaries reducing their exposure to announcement risks by providing liquidity asymmetrically. This asymmetry...
Persistent link: https://www.econbiz.de/10012921151
Using a sample of 2,210 observations for 170 banks operating in 12 countries with dual banking systems over 2006-2017 period, we find that Islamic banks have lower stock return non-synchronicity, lower illiquidity ratio, and their current returns have lower future earnings prediction ability...
Persistent link: https://www.econbiz.de/10012906462
We consider forecast guidance as a mechanism that managers use to avoid negative earnings surprises. Modeling forecast guidance using methods by Matsumoto, [Accounting Review 77 (3) (2002) 483-514] and Bartov et al. [Journal of Accounting and Economics 33 (2) (2002) 173-204], we show that...
Persistent link: https://www.econbiz.de/10014115221
We examine the association between board independence and the characteristics of non-GAAP earnings. Our results suggest that companies with less independent boards are more likely to opportunistically exclude recurring items from non-GAAP earnings. Specifically, we find that exclusions from...
Persistent link: https://www.econbiz.de/10013136316
Our paper examines the association between components of analysts' earnings surprises and future earnings. We decompose the analysts' earnings surprise into its revenue, pretax margin, pretax income, and tax components. After controlling for current period earnings and discretionary accruals, we...
Persistent link: https://www.econbiz.de/10012999728