Sustained Earnings and Revenue Growth,Earnings Quality,and Earnings Response Coefficients |
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| Authors: | Aloke?Ghosh Zhaoyang?Gu Email author" target="_blank">Prem?C? JainEmail author |
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| Institution: | (1) Office of Economic Analysis and Zicklin School of Business, Baruch College, The Securities and Exchange Commission, the City University of New York, 20549, 10010 Newyork, DC, NY, USA;(2) Tepper School of Business, Carnegie Mellon University, 15213 Pittsburgh, PA, USA;(3) McDonough School of Business, Georgetown University, 20057 Washington, DC, USA |
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| Abstract: | We show that firms reporting sustained increases in both earnings and revenues have (1) higher quality earnings and (2) larger earnings response coefficients (ERCs) in comparison to firms reporting sustained increases in earnings alone. With respect to earnings quality, firms with revenue-supported increases in earnings have more persistent earnings, exhibit less susceptibility to earnings management, and have higher future operating performance. With respect to response coefficients, firms with revenue-supported increases in earnings have both higher ERCs and lower book value response coefficients, consistent with the implications of the Ohlson (1995, Contemporary Accounting Research 12, 661–687) model.JEL Classification: G12, M41 |
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| Keywords: | earnings growth revenue growth earnings quality earnings response coefficients |
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