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Sustained Earnings and Revenue Growth, Earnings Quality, and Earnings Response CoefficientsAloke (Al) GhoshCity University of New York (CUNY) - Baruch College Zhaoyang GuChinese Univ of Hong Kong - School of Accountancy Prem C. JainGeorgetown University - Department of Accounting and Business Law June 2004 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) model.
Number of Pages in PDF File: 36 Keywords: earnings growth, revenue growth, earnings quality, earnings response coefficients JEL Classification: G12, M41, M43 working papers seriesDate posted: May 12, 2003Suggested CitationContact Information
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