On the Market Reaction to Revenue and Earnings Surprises

Posted: 18 Nov 2008

See all articles by Itay Kama

Itay Kama

University of Michigan, Stephen M. Ross School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 12, 2008

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.

Keywords: Earnings surprises, Revenue surprises, Contextual analysis, Information content, Post-earnings announcement drift, Financial statement analysis.

JEL Classification: D40, G12, G14, M41.

Suggested Citation

Kama, Itay, On the Market Reaction to Revenue and Earnings Surprises (November 12, 2008). Journal of Business Finance & Accounting, forthcoming.. Available at SSRN: https://ssrn.com/abstract=1302270

Itay Kama (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-4538 (Phone)

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