Abstract

http://ssrn.com/abstract=414142
 
 

References (27)



 
 

Citations (22)



 


 



Earnings Quality and the Pricing Effects of Earnings Patterns


Jennifer Francis


Duke University

Ryan LaFond


BlackRock

Per Olsson


Duke University

Katherine Schipper


Duke University - Fuqua School of Business

April 2003


Abstract:     
We examine whether pricing effects associated with three earnings patterns (increasing annual earnings, quarterly earnings that consistently meet or exceed analyst forecasts, and smooth earnings) are related to each other and, separately, to the quality of the underlying earnings. We identify distinctly-priced incremental elements of increasing earnings and earnings quality. While the statistical significance of the incremental pricing effects of earnings smoothness and of patterns of earnings that meet or exceed analyst forecasts are mixed, in all cases, their economic importance is modest. Our main finding concerns the relation between the pricing effects of earnings patterns and earnings quality: holding constant the level of the pattern, the largest (smallest) pricing effects are associated with earnings patterns supported by high (low) quality earnings. Moreover, for all three earnings patterns, we document that the market either attaches no reward to, or imposes a penalty on, patterns achieved with low quality earnings.

Number of Pages in PDF File: 53

Keywords: earnings patterns, earnings quality

JEL Classification: G12, M41, M43, G29

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Date posted: June 25, 2003  

Suggested Citation

Francis, Jennifer and LaFond, Ryan and Olsson, Per and Schipper, Katherine, Earnings Quality and the Pricing Effects of Earnings Patterns (April 2003). Available at SSRN: http://ssrn.com/abstract=414142 or http://dx.doi.org/10.2139/ssrn.414142

Contact Information

Jennifer Francis (Contact Author)
Duke University ( email )
Fuqua School of Business
Durham, NC 27708
United States
919-660-7817 (Phone)
919-648-2818 (Fax)
Ryan LaFond
BlackRock ( email )
400 Howard Street
San Francisco, CA 94105
United States
Per Mikael Olsson
Duke University ( email )
Box 90120
Durham, NC 27708-0120
United States
Katherine Schipper
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
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