On the Market Reaction to Revenue and Earnings Surprises

20 Pages Posted: 27 Apr 2009

See all articles by Itay Kama

Itay Kama

University of Michigan, Stephen M. Ross School of Business

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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.

Suggested Citation

Kama, Itay, On the Market Reaction to Revenue and Earnings Surprises. Journal of Business Finance & Accounting, Vol. 36, Nos. 1-2, pp. 31-50, January/March 2009. Available at SSRN: https://ssrn.com/abstract=1378263 or http://dx.doi.org/10.1111/j.1468-5957.2008.02121.x

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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