Investors' Differential Reaction to Positive versus Negative Earnings Surprises

2008 ◽  
Vol 25 (3) ◽  
pp. 891-920 ◽  
Author(s):  
Arianna Spina Pinello
Keyword(s):  
Differential Reaction ◽  
Earnings Surprises ◽  
Negative Earnings

scholarly journals Ownership Structure And Managerial Behavior To Beat Market Expectation In Korea

2014 ◽  
Vol 30 (4) ◽  
pp. 1063
Author(s):  
Hyewon Paik ◽  
YunSung Koh
Keyword(s):  
Ownership Structure ◽  
Stock Price ◽  
Stock Exchange ◽  
Foreign Ownership ◽  
Managerial Behavior ◽  
Analyst Expectations ◽  
Earnings Surprises ◽  
Large Shareholders ◽  
Market Expectations ◽  
Negative Earnings

This paper examines whether firms ownership structure in Korea changes managers' behavior to meet or beat market expectations. We examine whether managers manage earnings upward and/or guide analyst expectations downward to avoid negative earnings surprises. By using companies listed on the Korean Stock Exchange, we find that the inclusion of a higher proportion of foreign ownership significantly increases the probability to meet or beat market expectations. The finding suggests that the firms with higher foreign ownership try to satisfy their foreign investors who emphasize current profits by boosting the stock price. We also find that managers are less likely to avoid negative earnings surprises as large shareholders ownership increases. The results imply that large shareholders play an internal monitoring role for managers' earnings and/or expectations management. In addition, firms with large shareholders ownership rely less on income-increasing discretionary accruals. Our findings supports the convergence-of-interest hypothesis that as the controlling shareholders ownership level increases, the interest of the controlling shareholder decreases managers opportunistic behavior to manage earnings.

The Impact of Market-Nurtured Optimism on Mergers: Empirical Evidence by the Taiwan's Equity Market

2013 ◽  
Vol 16 (03) ◽  
pp. 1350021 ◽  
Author(s):  
Pei-Gi Shu ◽  
Yin-Hua Yeh ◽  
Shean-Bii Chiu ◽  
Li-Hui Wang
Keyword(s):  
Empirical Evidence ◽  
Detrimental Effect ◽  
Good Governance ◽  
Market Value ◽  
Governance Structure ◽  
Equity Market ◽  
Earnings Surprises ◽  
The Impact ◽  
Negative Earnings

We create a novel measure of market-nurtured optimism in that managers become more optimistic if the market had responded more favorably, and to a larger extent to positive earnings surprises, than to negative earnings surprises. These market-nurtured managers are prone to engage in value-destructive mergers. The inclination is further reinforced by abundant internal cash. In contrast, a good governance structure mitigates the odds of engaging in mergers and the detrimental effect associated with mergers. The acquisitions launched by overconfident managers are associated with lower market value.

Earnings Surprises that Motivate Analysts to Reduce Average Forecast Error

2008 ◽  
Vol 83 (2) ◽  
pp. 303-325 ◽  
Author(s):  
Orie E. Barron ◽  
Donal Byard ◽  
Yong Yu
Keyword(s):  
Private Information ◽  
Forecast Error ◽  
Earnings Forecasts ◽  
Forecast Errors ◽  
Future Earnings ◽  
Earnings Surprises ◽  
The Mean ◽  
Negative Earnings

Large earnings surprises and negative earnings surprises represent more egregious errors in analysts' earnings forecasts. We find evidence consistent with our expectation that egregious forecast errors motivate analysts to work harder to develop or acquire relatively more private information in an effort to avoid future forecasting failures. Specifically, we find that after large or negative earnings surprises there is a greater reduction in the error in individual analysts' forecasts of future earnings, and these individual forecasts are based more heavily on individual analysts' private information. This increased reliance on private information reduces the error in the mean forecast of upcoming earnings (even after controlling for the effect of reduced error in individual forecasts). As reliance on private information increases, more of each individual forecast error is idiosyncratic, and thus averaged out in the computation of the mean forecast.

scholarly journals Does The Market React Differently To Chaebol Firms?

2014 ◽  
Vol 30 (5) ◽  
pp. 1525
Author(s):  
Heejin Park ◽  
Jinsoo Kim ◽  
Mihye Ha ◽  
Sambock Park
Keyword(s):  
Stock Prices ◽  
Market Response ◽  
Earnings Surprises ◽  
Negative Earnings

<p class="EEH2">Based on a sample of Korean firms listed on the KOSPI and KOSDAQ from 2001 to 2011, we examined whether the affiliation of a firm with a Chaebol group affects the sensitivity of stock prices to earnings surprises. We found that the market response to positive (negative) earnings surprises is more positive (negative) for Chaebol firms than for non-Chaebol firms. In addition, we investigated how intra-group transactions affect the ERCs of Chaebol firms by comparing with those of non-Chaebol firms. Our results show that the intra-group transactions of Chaebol firms are positively related to ERCs under both positive and negative earnings surprises. However, we did not find the same results from the analyses of non-Chaebol firms.</p>

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