The Rewards to Meeting or Beating Earnings Expectations

Posted: 6 Dec 2002

See all articles by Eli Bartov

Eli Bartov

NYU Stern School of Business

Dan Givoly

Pennsylvania State University, Smeal College of Business

Carla Hayn

University of California at Los Angeles - Anderson School of Management

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Abstract

This paper finds that firms that meet or beat current analysts' earnings expectations (MBE) enjoy a higher return over the quarter than firms with similar quarterly earnings forecast errors that fail to meet these expectations. Further, such a premium to MBE, although somewhat smaller, exists in cases where MBE is likely to have been achieved through earnings or expectations management. The findings also indicate that the premium to MBE is a leading indicator of future performance. This premium and its predictive ability are only marginally affected by whether the MBE is genuine or the result of earnings or expectations management.

Keywords: earnings expectations, analysts' forecasts, expectation management, earnings management, losses

JEL Classification: G14, G24, G29, M41, M43

Suggested Citation

Bartov, Eli and Givoly, Dan and Hayn, Carla, The Rewards to Meeting or Beating Earnings Expectations. Journal of Accounting and Economics, Vol. 33, No. 2, pp. 173-204, June 2002. Available at SSRN: https://ssrn.com/abstract=332043

Eli Bartov

NYU Stern School of Business ( email )

44 W. 4th Street, Suite 10-96
New York, NY 10012
United States
212.998.0016 (Phone)

Dan Givoly (Contact Author)

Pennsylvania State University, Smeal College of Business ( email )

305 Business Building
University Park, PA 16802
United States
814-865-0587 (Phone)
814-863-8393 (Fax)

Carla Hayn

University of California at Los Angeles - Anderson School of Management ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-206-9225 (Phone)

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