Asymmetric Market Reactions of Growth and Value Firms with Management Earnings Forecasts

19 Pages Posted: 2 May 2007

See all articles by H. Chan

H. Chan

University of Melbourne - Department of Finance; Monash University - Department of Accounting

Robert W. Faff

University of Queensland

Y. K. Ho

National University of Singapore (NUS) - Department of Accounting

Alan L. Ramsay

Monash University - Department of Accounting

Abstract

We study the market reaction of Australian firms issuing management earnings forecasts (MEF). Specifically, we measure and distinguish between the immediate and post-earnings announcement impact of MEF. Our analysis is conditioned on growth/value characteristics and news surprise and we test for asymmetric effects on these two conditioning variables. We find that the 3-day returns following non-routine bad news forecasts are significantly more negative for growth firms than value firms. No significant differences are found for good news forecasts. In the post-earnings announcement period, both growth and value firms have significant negative post-earnings announcement drift following non-routine bad news forecasts but they are not significantly different from each other.

Suggested Citation

Chan, Howard and Faff, Robert W. and Ho, Y. K. and Ramsay, Alan, Asymmetric Market Reactions of Growth and Value Firms with Management Earnings Forecasts. International Review of Finance, Vol. 6, No. 1-2, pp. 79-97, March/June 2006. Available at SSRN: https://ssrn.com/abstract=981546 or http://dx.doi.org/10.1111/j.1468-2443.2007.00060.x

Howard Chan (Contact Author)

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Monash University - Department of Accounting ( email )

Building 11E
Clayton, Victoria 3800
Australia

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Y. K. Ho

National University of Singapore (NUS) - Department of Accounting

1 Business Link
Singapore, 117592
Singapore

Alan Ramsay

Monash University - Department of Accounting ( email )

Building 11E
Clayton, Victoria 3800
Australia

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