Asymmetric Market Reactions of Growth and Value Firms with Management Earnings Forecasts
19 Pages Posted: 2 May 2007
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.
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