Earnings Benchmark Hierarchy
Accounting & Finance, Forthcoming
36 Pages Posted: 27 Mar 2015 Last revised: 30 Mar 2015
Date Written: March 25, 2015
We examine the hierarchy of earnings benchmarks in Australia. Our results demonstrate a disconnect between the actions managers appear to take, and the market reaction to firms exceeding or just missing earnings benchmarks. The actions of managers appear consistent with them acting in a manner to avoid making losses and earnings decreases. On the other hand, the market reacts in a manner where the analysts' earnings forecast is at the top of the earnings benchmark hierarchy. However, for firms without analyst coverage, the reporting of positive earnings is the predominant earnings benchmark.
Keywords: Thresholds, Analyst Forecasts, Earnings Benchmarks, Valuation
JEL Classification: M41
Suggested Citation: Suggested Citation