On the Market Reaction to Revenue and Earnings Surprises |
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| Authors: | Itay Kama |
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| Affiliation: | The author is from the Faculty of Management, Tel Aviv University. He would like to thank an anonymous referee, Eli Amir, Shimon Benninga, Roy Dilmanian, Shmuel Kandel, Dayna Kesten, Gilad Livne, Ronen Mansury, Andrew Stark (editor) and seminar participants at Columbia University, The Hebrew University of Jerusalem, INSEAD, London Business School, New York University, and Tel Aviv University for useful comments. He also thanks Gerda Kessler for expert editorial assistance and gratefully acknowledges financial support by the David Orgler Banking and Finance Research Fund and the Harry Simons Scholarship Fund. |
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| Abstract: | Abstract: This study extends Ertimur et al. (2003) and Jegadeesh and Livnat (2006a) by providing a contextual framework for the information content of revenue and earnings surprises. I find that the influence of earnings surprises (revenue surprises) on stock returns is lower (higher) in R&D intensive companies. Also, market reaction to earnings surprises is lower in the fourth quarter, and to revenue surprises it is higher in industries with oligopolistic competition. A comprehensive analysis indicates that, in contrast to previous studies for the full sample, in several contexts market reaction to earnings surprises is not higher than to revenue surprises. |
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| Keywords: | earnings surprises revenue surprises contextual analysis information content post-earnings announcement drift financial statement analysis |
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