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Earnings Declines (earning + decline)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Impact of earnings performance on price-sensitive disclosures under the Australian continuous disclosure regime

ACCOUNTING & FINANCE, Issue 2 2009
Grace Chia-Man Hsu
M40; M48 Abstract This study examines the relation between accounting earnings and the frequency of price-sensitive corporate disclosure under Australia's statutory continuous disclosure requirements. Despite low litigation threats and excepting loss-making firms, results show that firms with earnings declines (bad news) are more likely to make continuous disclosure than firms with earnings increases (good news). This suggests that market forces and regulators' scrutiny are sufficient to induce a ,bad news' disclosure bias. This study also examines the ,materiality' requirement under the continuous disclosure requirements and finds a positive relation between disclosure frequency and the magnitude of earnings news. The earnings,return correlation is positively associated with disclosure frequency for the financial services industry. [source]

Do Analysts and Auditors Use Information in Accruals?

JOURNAL OF ACCOUNTING RESEARCH, Issue 1 2001
Mark T. Bradshaw
Existing research indicates that firms with high accruals are more likely to experience future earnings problems, but that investors' expectations, as reflected in stock prices, do not appear to anticipate these problems. In this paper, we directly examine the published opinions of two types of professional investor intermediaries to see if they provide investors with information concerning the future earnings problems experienced by firms with high accruals. First, we examine the earnings forecasts of sell-side analysts. We show that analysts' earnings forecasts do not incorporate the predictable future earnings declines associated with high accruals. Second, we examine the behavior of independent auditors. We find no evidence that auditors signal the future earnings problems associated with high accruals through either their audit opinions or through auditor changes. Overall, our evidence indicates that analysts and auditors do not alert investors to the future earnings problems associated with high accruals, thus corroborating previous findings that investors do not appear to anticipate these problems. [source]

Market Reactions to Warnings of Negative Earnings Surprises: Further Evidence

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2008
Weihong Xu
Abstract:, This study examines two plausible explanations for Kasznik and Lev's (1995) counterintuitive finding that warning firms are subject to more negative market returns than no-warning firms. Namely, are the more negative market reactions to warning firms due to their poorer future earnings performance or due to investor overreaction? I find that, compared with no-warning firms, warning firms experience more severe one-year-ahead earnings declines and these earnings declines can explain the stronger market returns to warning firms. However, my results do not support an investor overreaction explanation. The tests of subsequent abnormal returns of warning firms over various windows do not detect stock return reversals due to correction for overreaction. In addition, the greater revisions in analysts' forecasts for warning firms are found to enhance analyst accuracy rather than increase analyst pessimism. Collectively, my results suggest that the more negative market reactions to warning firms reflect investors' rational anticipation of more severe declines in future earnings for warning firms rather than investor overreaction. [source]