Revenues and expenses are fundamentally proportional to one another, but are likely to be disproportionally affected by transitory items or economic shocks. We build on this observation and propose a new measure of sustainable earnings based on deviations from normal profit margins. While some...

This study examines investor reaction to return on common equity (ROCE) and its components around the announcement of quarterly earnings. It is an issue that the accounting literature has not examined, notwithstanding the importance of ratio analysis in general and the DuPont decomposition in...

Though ample empirical evidence alludes to the importance of disaggregated accounting data in the context of earnings management, extant accounting theory considers biases in reporting earnings mostly at the aggregated level of the reported earnings. By analyzing reporting manipulations at the...

Financial analysis often involves decomposing variables into components, emphasizing the structured hierarchy among ratios. We distinguish between unconditional persistence (a variable's autocorrelation coefficient), and conditional persistence (the power of a variable's persistence to explain...

Revenues and expenses are fundamentally proportional to one another, but are likely to be disproportionally affected by transitory items or economic shocks. We build on this observation and propose a new measure of sustainable earnings based on deviations from normal profit margins. While some...