The Decline in Quarterly Earnings Persistence

Posted: 28 May 2001

See all articles by Stephen P. Baginski

Stephen P. Baginski

University of Georgia - J.M. Tull School of Accounting

Bruce C. Branson

North Carolina State University - College of Management

Kenneth S. Lorek

Northern Arizona University

G. Lee Willinger

University of Oklahoma

Date Written: February 2001

Abstract

Although prior research has documented a decline in earnings relevance for equity investors through time, precise evidence has not been collected on why the decline has occurred. Possible reasons for changes in earnings relevance identified in the literature include changes in persistence, growth, discount rates, lead-lag relationships between returns and earnings, and disclosure activity. For a sample of 172 New York Stock Exchange firms, we document a substantial decline in the persistence of quarterly accounting earnings over the 1967 to 1990 period. Our findings hold regardless of whether firms are in intangible-intensive industries and whether firms are in industries with dramatic increases in spending on information technology through time. Further, ex ante measures of expected economic change (i.e., firm size, expenditures to create barriers-to-entry, and product type) are intertemporally invariant in our sample, and we find that a key ex post measure of economic change, quarterly sales persistence, does not experience a decline through time for our sample firms.

JEL Classification: M41, M45, G12

Suggested Citation

Baginski, Stephen P. and Branson, Bruce C. and Lorek, Kenneth S. and Willinger, G. Lee, The Decline in Quarterly Earnings Persistence (February 2001). Available at SSRN: https://ssrn.com/abstract=271189

Stephen P. Baginski (Contact Author)

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States

Bruce C. Branson

North Carolina State University - College of Management ( email )

Hillsborough Street
Raleigh, NC 27695-8614
United States
919-515-4435 (Phone)
919-515-4446 (Fax)

Kenneth S. Lorek

Northern Arizona University ( email )

PO Box 15066
College of Business Department of Accounting
Flagstaff, AZ 86011
United States
520-523-7406 (Phone)
520-523-7331 (Fax)

G. Lee Willinger

University of Oklahoma ( email )

307 W Brooks
School of Accounting Room 200
Norman, OK 73019
United States
405-325-5780 (Phone)
405-325-7348 (Fax)

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