The Brand Value of Earnings: An Event Study of Consumer Responses to Earnings Announcements

The Accounting Review, Forthcoming

53 Pages Posted: 6 Apr 2021 Last revised: 30 Oct 2023

See all articles by Michael D. Kimbrough

Michael D. Kimbrough

University of Maryland - Robert H. Smith School of Business

Neeru Paharia

Georgetown University - McDonough School of Business

Sijing Wei

Creighton University - Heider College of Business

Xu (Frank) Wang

Saint Louis University - Chaifetz School of Business

Date Written: October 23, 2023

Abstract

We provide evidence from the first short-window event study of consumers’ perceptual responses to earnings announcements, using daily consumer perception data. We document a positive association between the change in consumers’ overall perception of a brand at the time of the earnings announcement and the earnings surprise—that is, a positive consumer earnings response coefficient (CERC). CERC is larger when there is greater traditional news or social media activity, indicating that news dissemination is an important channel for consumers to respond to earnings news. Moreover, CERC varies based on brand and consumer characteristics. Changes in consumer perceptions at the time of the earnings announcement are positively associated with changes in purchase consideration and intent and with changes in realized future sales growth. To maximize identification, we document a positive and statistically significant CERC in a controlled experiment. Our findings demonstrate the importance of earnings to an important stakeholder.

Keywords: consumer earnings response coefficient (CERC), earnings surprise, consumer perceptions, event study, external stakeholders, brand value, real effects, sales growth

JEL Classification: M31, M41, G14

Suggested Citation

Kimbrough, Michael D. and Paharia, Neeru and Wei, Sijing and Wang, Xu (Frank), The Brand Value of Earnings: An Event Study of Consumer Responses to Earnings Announcements (October 23, 2023). The Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3818970

Michael D. Kimbrough (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

Robert H. Smith School of Business
College Park, MD 20742-9157
United States
301-405-8222 (Phone)
301-314-9414 (Fax)

Neeru Paharia

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

Sijing Wei

Creighton University - Heider College of Business ( email )

602 N 20th St
Omaha, NE Nebraska 68102
United States
402-280-1297 (Phone)

HOME PAGE: http://https://business.creighton.edu/

Xu (Frank) Wang

Saint Louis University - Chaifetz School of Business ( email )

3674 Lindell Blvd
St. Louis, MO 63108-3397
United States

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