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    Investor reaction to strategic emphasis on earnings numbers: An empirical study

    Access Status
    Open access via publisher
    Authors
    Sadique, Shibley
    Rahman, M.
    Date
    2013
    Type
    Journal Article
    
    Metadata
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    Citation
    Sadique, M. Shibley and Rahman, M. Arifur. 2013. Investor reaction to strategic emphasis on earnings numbers: An empirical study. Contemporary Economics. 7 (3): pp. 51-64.
    Source Title
    Contemporary Economics
    DOI
    10.5709/ce.1897-9254.89
    ISSN
    20840845
    URI
    http://hdl.handle.net/20.500.11937/47415
    Collection
    • Curtin Research Publications
    Abstract

    We analyze the earnings information and stock prices of S&P500 firms and find that investors followingS&P500 stocks (i) respond more to pro forma earnings than to GAAP earnings, (ii) respond toan emphasis on pro forma earnings, and (iii) are fixated on pro forma earnings. We provide the firstdirect evidence that a strategic emphasis on earnings numbers may affect return volatility. Further,our results do not support the argument that a larger investor response to Street earnings might bedriven by large differences between the Street numbers and GAAP numbers.

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