Sustained Earnings and Revenue Growth, Earnings Quality, and Earnings Response Coefficients
Aloke (Al) Ghosh
City University of New York (CUNY) - Baruch College
Chinese Univ of Hong Kong - School of Accountancy
Prem C. Jain
Georgetown University - Department of Accounting and Business Law
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, M43working papers series
Date posted: May 12, 2003
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