Journal articles: 'Returns-earnings relationship'

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Brugni, Talles, Marcelo Cabus Klotzle, Antonio Carlos Figueiredo Pinto, Luiz Paulo Lopes Fávero, and Muhhamad Safdar Sial. "AGGREGATE EARNINGS AND RETURNS IN BRAZIL." Contabilidade Vista & Revista 32, no. 2 (July 29, 2021): 38–58. http://dx.doi.org/10.22561/cvr.v32i2.5942.

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We used the method employed in Kothari, Lewellen and Warner (2006) to show the relationship between aggregate earnings and market returns in Brazil in the period from 1995 to 2017. Considering the findings found by Kothari, Lewellen and Warnet (2006), our results indicate that the theory of Bernard and Thomas (1990) is more consistent with the US market than with the Brazilian market, signaling that the aggregate post-earnings announcement drift tends to be larger in markets with higher earnings persistence, like Brazil. Our findings also indicate that the relationship between aggregate returns and earnings in Brazil tends to be positive for the current period and the next two quarters, corroborating the Sadka and Sadka (2009) study. Considering that the predictability of earnings in the US market is higher than that in Brazil, our results also support the argument by He and Hu (2014) that the relationship between aggregate earnings and returns is linked to each country’s level of disclosure. However, new evidences reveal the influence of high interest rates on financial market results, suggesting that expectations of increased interest rates tend to reduce aggregate current returns in Brazil due to the possible migration of capital to lower risk, given the attractiveness of their returns in an environment of high inflation.

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Jin, Jong-Dae. "The relationship between accounting earnings and bond returns." Journal of Accounting and Public Policy 11, no. 3 (September 1992): 245–67. http://dx.doi.org/10.1016/0278-4254(92)90010-u.

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Alinezhad Sarokolaei, Mehdi, and Mehdi Tahmasbi. "Effect of Continuity and Smoothing of Profit on Corporate Profit- Stock Returns With Taking into Account the Heterogeneous Relationship of Profit - Efficiency on Companies Admitted to the Tehran Stock Exchange." Journal of Social Sciences Research, no. 54 (April 8, 2019): 982–89. http://dx.doi.org/10.32861/jssr.54.982.989.

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The purpose of this study was to investigate the effect of continuity and smoothing of profits on the relationship between corporate profits - Stock efficiency taking into account the heterogeneous profit relationship – efficiency on companies admitted to the Tehran Stock Exchange, generally, profit has always been a factor in investor decisions. In this regard, on the one hand, accounting and stock returns are linked together, on the other hand, the variable of earnings quality is related to accounting profit and stock returns. So it may be that the question arises what is the effect of the continuity and smoothing of profits on the relationship between accounting profit and stock returns? The present research seeks to answer this question; as a result, the main question of the research is presented as follows: What is the effect of continuity and smoothing of earnings on the relationship between earnings and stock returns for listed companies in Tehran Stock Exchange? To check this, the data of 123 companies listed in Tehran Stock Exchange during the years 2012-2016 were used; data was analyzed using the Logit method using Eviews10 software. Evidence and empirical findings have shown that; both profit continuity and profit smoothing criteria have significant effects on the heterogeneous relationship between current period earnings and stock returns.

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Alinezhad Sarokolaei, Mehdi, and Mehdi Tahmasbi. "Effect of Continuity and Smoothing of Profit on Corporate Profit- Stock Returns With Taking into Account the Heterogeneous Relationship of Profit - Efficiency on Companies Admitted to the Tehran Stock Exchange." Journal of Social Sciences Research, Special Issue 5 (December 15, 2018): 693–700. http://dx.doi.org/10.32861/jssr.spi5.693.700.

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The purpose of this study was to investigate the effect of continuity and smoothing of profits on the relationship between corporate profits - Stock efficiency taking into account the heterogeneous profit relationship – efficiency on companies admitted to the Tehran Stock Exchange, generally, profit has always been a factor in investor decisions. In this regard, on the one hand, accounting and stock returns are linked together, on the other hand, the variable of earnings quality is related to accounting profit and stock returns. So it may be that the question arises what is the effect of the continuity and smoothing of profits on the relationship between accounting profit and stock returns? The present research seeks to answer this question; as a result, the main question of the research is presented as follows: What is the effect of continuity and smoothing of earnings on the relationship between earnings and stock returns for listed companies in Tehran Stock Exchange? To check this, the data of 123 companies listed in Tehran Stock Exchange during the years 2012-2016 were used; data was analyzed using the Logit method using Eviews10 software. Evidence and empirical findings have shown that; both profit continuity and profit smoothing criteria have significant effects on the heterogeneous relationship between current period earnings and stock returns.

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Maditinos, Dimitrios I., Željko Šević, Jelena Stankevičienė, and Nikolaos Karakoltsidis. "EARNINGS RESPONSE COEFFICIENTS IN THE GREEK MARKET." Journal of Business Economics and Management 14, no. 2 (May 7, 2013): 414–31. http://dx.doi.org/10.3846/16111699.2012.758168.

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The paper explores the relationship between accounting information and stock returns of the companies listed on the Athens Stock Exchange (ASE) in the period 1998–2008. Publicly available financial data on the companies included in the ASE during 1998–2008 have been collected and processed. The data sample consists of 245 companies and varies from 2,166 to 1,441 firm-year observations. The research methodology has been based on the extension of the model introduced by Kothari and Sloan (1992) and investigates whether the level of earnings divided by price at the beginning of the stock return period is associated with returns in the context of ‘prices lead earnings’ using annual and quarterly data. Cross-sectional regression analysis points to a significant relationship between earnings and returns on measurement windows of one year and longer. Similar results have been found in the case of a cumulative model where earnings are aggregated up to four years; however, relationship in the short measurement window up to three quarters has resulted in low earnings response coefficients.

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Singh, Harjinder, and May Sze Khoo. "The impact of industry specialist audit firms on pricing of discretionary accruals and earnings management: Australian evidence." Corporate Ownership and Control 9, no. 2 (2012): 158–77. http://dx.doi.org/10.22495/cocv9i2c1art2.

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This paper examines the relationship between the capital market pricing of Australian publicly listed firms and earnings management (proxied by discretionary accruals) during a three-year pooled time-frame of 2008 to 2010. More importantly, the role of industry specialist audit firms on market returns and earnings management relationship is investigated. Main results indicate a significant negative relationship between firm returns and earnings management. However, there is no significance in the role of industry specialist audit firms on the firm returns and earnings management linkage. On the other hand, sensitivity tests indicate that industry specialist audit firms play in significant monitoring role for audit committees with less than fifty percent of their members classified as independent. One major contribution is for regulators (aiming to improve audit quality) to strengthen key firm-level corporate governance mechanisms. Specifically, by placing the consequences from this paper into perspective, there may be a greater likelihood of increased audit quality by altering audit committee’s structure, composition and authority levels.

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Vermeulen, Marise. "Fundamental factors influencing returns of shares listed on the Johannesburg Stock Exchange in South Africa." Journal of Economic and Financial Sciences 9, no. 2 (December 18, 2017): 426–35. http://dx.doi.org/10.4102/jef.v9i2.50.

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This study investigated the relationship between share returns and nine variables that had been proven to influence returns in previous research, using a multiple regression analysis. These variables are size, leverage, book-to-market ratio, earnings yield, dividend payout, earnings growth, return on equity, earnings per share and asset growth. The impact of some of the variables on share returns proved to be insignificant, and some collinearity was identified between some of the variables. However, three significant variables were identified and the final regression model included the book-to-market ratio, dividend payout and leverage as the explanatory variables.

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Öztürk, Hakkı. "The Relationship Between Earnings-to-Price, Current Ratio, Profit Margin and Return: An Empirical Analysis on Istanbul Stock Exchange." Accounting and Finance Research 7, no. 1 (November 20, 2017): 109. http://dx.doi.org/10.5430/afr.v7n1p109.

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This paper aims to investigate the relationship between current ratio, earnings to price, net profit margin and stock returns in İstanbul Stock Exchange over the period 2008-2016 by employing panel data analysis. Due to the existence of heteroskedasticity, cross sectional dependence and autocorrelation in sample data, two-way fixed effects model is estimated by robust estimators. Both Parks-Kmenta and Beck-Katz methods are conducted to check whether the results are consistent or not. According to Park-Kmenta estimation model, the results show that earnings to price and net profit margin are significant to explain stock returns in İstanbul Stock Exchange while current ratio is found insignificant. Moreover, the test based on Beck-Katz model produces the similar results. Earnings to price and net profit margin are strong determinants of stock returns in Istanbul Stock Exchange. Stocks with higher E/P ratios and profit margins generate higher returns for the next period.

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Paramita, Ratna Wijayanti Daniar. "THE WINDOW INFORMATION FOR INVESTOR ON ACCOUNTING PROFIT FORECASTING." JURNAL TERAPAN MANAJEMEN DAN BISNIS 3, no. 2 (October 30, 2017): 193. http://dx.doi.org/10.26737/jtmb.v3i2.315.

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This study aimed to obtain empirical evidence, examine and explain he factors (leverage, persistence, growth, size and beta) that affect informativeness of earnings and its application in the financial statements at Manufacturing Companies listed in the Indonesia Stock Exchange 2013-2016. Research on the relationship between stock returns within come to determine the extent of their relationship are many who use earnings figures as the dependent variable regressed with stock returns as the independent variables are calculated by different methods. This method measures the magnitude of abnormal stock returns in response to the expected components of a company's reported earnings by using Earning Response Coefficient (ERC). Plan for data analysis in this study will be conducted using Path Analysis with analysis application of Moment Structure (AMOS).Conclusions of this study is significant influence of Leverage, Persistence profit and growth to Informativeness of earnings, either directly or through intervening variables Size and Beta.

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Loh, Alfred L. C., and Terry S. Walter. "The Relationship Between Unsystematic Security Returns and Earnings Forecast Errors." Accounting & Finance 26, no. 1 (May 1986): 13–24. http://dx.doi.org/10.1111/j.1467-629x.1986.tb00071.x.

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Isshaq, Zangina, and Robert Faff. "Stock Liquidity Risk and the Cross-sectional Earnings-Returns Relationship." Journal of Business Finance & Accounting 43, no. 9-10 (September 22, 2016): 1121–41. http://dx.doi.org/10.1111/jbfa.12209.

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Sumantri, Farid Addy, and Purnamawati ,. "MANAJEMEN LABA, RETURN SAHAM, DAN KINERJA OPERASI SEBAGAI PEMODERASI." Media Riset Akuntansi, Auditing dan Informasi 13, no. 2 (May 3, 2017): 61. http://dx.doi.org/10.25105/mraai.v13i2.1743.

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The purpose of this study was to determine the indications of the practice of earnings management at the time of the IPO, one year after the IPO, and two years after the IPO. This study also examined the effect of earnings management on stock returns and operating performance in moderating the relationship between earnings management and stock returns. The study sample comprised 33 firms that go public in the year 2007 to 2011 using a purposive sampling method. Earnings management is proxied by discretionary accruals using the Modified Jones Model, which used proxy for the stock return is cummulative abnormal returns (CAR), while for the company’s operating performance used proxy for the return on assets (ROA). The results showed that there were indications of earnings management at the time of the IPO, one year after the IPO, and two years after the IPO with a lower profit rate. No effect on earnings management is proxied by stock return cummulative abnormal returns (CAR). Operating performance of the company also can not moderate the relationship between earnings management with stock return. Keywords: Earning Management, Initial Public Offering, Cummulative Abnormal Return, Return On Asset

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Basilico, Elisabetta, and Hugh Grove. "The relationship between earnings quality, control mechanisms of corporate governance, and future stock price returns. The case of the Netherlands." Corporate Ownership and Control 10, no. 4 (2013): 379–89. http://dx.doi.org/10.22495/cocv10i4c4art1.

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This article extends prior research on the relation between earnings quality (assessed by accruals) and future stock price returns and adds new research on the relationships between direct and indirect corporate governance mechanisms of control with accruals and future stock price returns. We study public companies of the Netherlands and find the presence of mispricing associated with very high and very low accruals. We also find evidence that direct corporate governance control mechanisms, such as the existence of separate, independent, and skilled audit committees, are related to higher earnings quality and higher future stock price returns.

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Sumantri, Farid Addy, and Purnamawati . "MANAJEMEN LABA, RETURN SAHAM, DAN KINERJA OPERASI SEBAGAI PEMODERASI." Media Riset Akuntansi, Auditing dan Informasi 15, no. 2 (August 23, 2017): 133. http://dx.doi.org/10.25105/mraai.v15i2.2068.

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The purpose of this study was to determine the indications of the practice of earnings management at the time of the IPO, one year after the IPO, and two years after the IPO. This study also examined the effect of earnings management on stock returns and operating performance in moderating the relationship between earnings management and stock returns.The study sample comprised 33 firms that go public in the year 2007 to 2011 using a purposive sampling method. Earnings management is proxied by discretionary accruals using the Modified Jones Model, which used proxy for the stock return is cummulative abnormal returns (CAR), while for the company's operating performance used proxy for the return on assets (ROA).The results showed that there were indications of earnings management at the time of the IPO, one year after the IPO, and two years after the IPO with a lower profit rate. No effect on earnings management is proxied by stock return cummulative abnormal returns (CAR). Operating performance of the company also can not moderate the relationship between earnings management with stock return. Keywords: Earning Management, Initial Public Offering, Cummulative Abnormal Return, Return On Asset

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Erasmus, Pierre. "The information content of economic value added, residual income, earnings and operating cash flow: evidence from South African industrial shares." Corporate Ownership and Control 7, no. 3 (2010): 454–64. http://dx.doi.org/10.22495/cocv7i3c4p5.

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Proponents of the value based financial performance measure of Economic Value Added (EVA) argue that it is a major improvement over other traditional measures. This study investigates the relationship between EVA and market-adjusted share returns, and compares it to that of residual income, earnings and operating cash flow. Relative information content tests suggest that earnings have the strongest relationship with share returns. The results from the incremental information content tests indicate that although the EVA components provide statistically significant information content beyond that provided by residual income, the level of significance is low.

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Jasman, Jumawan, and Muhammad Kasran. "Profitability, Earnings Per Share on Stock Return with Size as Moderation." TRIKONOMIKA 16, no. 2 (December 28, 2017): 88. http://dx.doi.org/10.23969/trikonomika.v16i2.559.

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The purpose of this study was to analyze the effect of profitability and earnings per share on stock returns and the role of size as a moderating variable in state-owned companies listed in the Indonesia Stock Exchange (IDX) in the period of 2011-2016. By using purposive sampling, the number of samples included 18 companies. Method was conducted by downloading summary of financial statements in the Indonesia Stock Exchange. The research began with classical assumption test, multiple linear regression analysis was done with the absolute difference test. The research found that profitability had no effect on stock return. Earnings per share and size had a significant negative effect on stock return. The role of size as a moderating variable strengthened the relationship of earnings per share with stock returns, but it did not play a role in the relationship of profitability with stock returns.

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Park, Sorah. "Differential Effect Of The Sarbanes-Oxley Act On Individual And Institutional Investors." Journal of Applied Business Research (JABR) 32, no. 2 (March 1, 2016): 517. http://dx.doi.org/10.19030/jabr.v32i2.9593.

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This study investigates the differential effect of the Sarbanes-Oxley Act of 2002 (“SOX”) on unsophisticated individual investors and sophisticated institutional investors. I examine the relationship between abnormal stock returns around quarterly earnings announcements before and after SOX and investor sophistication. Empirical test results show that SOX positively affected stock returns reaction around the quarterly earnings announcement, consistent with prior literature. However, the increased stock returns reaction in the post-SOX period appears to be unrelated to individual investors. I find that the impact of SOX on institutional investor reaction to earnings announcement is statistically significant, whereas individual investor reaction to earnings announcement is not affected by SOX. This suggests that institutional investors have improved on the extent to which earnings information is efficiently priced after SOX, but not individual investors. These findings are important because the differential effect of the accounting disclosure regulation on investors has received little attention in the literature.

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Dangol, Jeetendra, and Bidhan Acharya. "The Effect of Firm Specific Variables on Stock Returns of Nepalese Banks." Journal of Balkumari College 9, no. 1 (July 14, 2020): 1–12. http://dx.doi.org/10.3126/jbkc.v9i1.30061.

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This study focuses to examine the firm specific fundamental variables impact on the stock returns in the context of Nepali banks. The study uses cross sectional panel data of 12 banks for the duration of ten years. The study finds the existence a negative relationship between stock returns (total yield) and firm size. Likewise, the study shows that the book to market equity has negative relationship with stock returns. However, the study reveals that the relationship of earnings yield and cash flow yield with the stock returns is contradicted in comparison to previous studies.

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Bawono, Andy Dwi Bayu, Mila Ramadhanti, and Lintang Kurniawati. "Earnings and Cash Flow Information on Its Value Relevance by The Book Value." Riset Akuntansi dan Keuangan Indonesia 5, no. 1 (April 24, 2020): 46–53. http://dx.doi.org/10.23917/reaksi.v5i1.10679.

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This study aims to examine the relationship of earnings and operating cash flow as an independent variable on the value relevance of accounting information proxied by stock returns by using book value as a moderating variable. The utilitation of stock returns as an independent variable is choosed as previous research on value relevance tends to use stock prices as an independent variable. The sample of this study is all population of companies listed on the Jakarta Islamic Index (JII) in the 2016-2018 period June-November (issued from June 1st) using saturation sampling. The data used in this study is compound from annual reports in the Indonesia Stock Exchange (IDX) and stock prices from Yahoo Finance. Further, data were tested using multiple linear regression analysis. The results showed that earnings and cash flow have an effect on value relevance proxied by stock returns. However, book value neither strengthens nor weakens earnings and cash flow towards stock returns as a moderating variable. Keywords : Earnings, Operation Cash Flow, Stock Return, Value Relevance, Jakarta Islamic Index

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Hooks, Jon A. "Can Earnings Innovations Explain The Inverse Relationship Between Unanticipated Inflation And Stock Returns?" Journal of Applied Business Research (JABR) 9, no. 2 (October 2, 2011): 10. http://dx.doi.org/10.19030/jabr.v9i2.6070.

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Hooks (1991) argues that the explanatory power of unanticipated inflation in stock return models appears to result from the relationship of unanticipated inflation with the earnings capitalization rate and not the impact inflation has on the level or growth rate of earnings. Here we extend this line of investigation by examining the relationship between unanticipated inflation and the earnings innovation extracted from a univariate earnings forecast. We show that unanticipated inflation has no significant relationship with innovations in conventional earnings. However, we find that unanticipated inflation has a significant positive relationship with the magnitude of the earnings innovation during the 1955-85 period when earnings are adjusted to account for the effects of inflation on firms assets and liabilities.

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Salehi, Mahdi, Masomeh Tagribi, and Shayan Farhangdoust. "The effect of reporting quality on stock returns of listed companies on the Tehran Stock Exchange." International Journal of Productivity and Performance Management 67, no. 1 (January 8, 2018): 4–19. http://dx.doi.org/10.1108/ijppm-09-2015-0127.

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Purpose The purpose of this paper is to examine the effect of earnings quality (as a proxy for financial reporting quality) of companies listed on the Tehran Stock Exchange (TSE) and the quality of their financial information disclosure on stock returns. Design/methodology/approach The authors test the hypotheses by conducting panel data analysis on a sample of 1,680 firm-year observations from companies listed on the TSE during 2009-2014. The authors also conduct the variance inflation factor and unit root tests to control for the severity of multicollinearity in their ordinary least squares regression analysis and whether the time series variables are non-stationary and possess a unit root. Findings Using Francis et al. (2005) and modified Jones (1991) models as measures for earnings quality, the results are indicative of a significant and positive relationship between firms’ earnings quality and their stock returns. However, the research findings suggest that earnings management as well as disclosure quality (DQ) is not significantly associated with firms’ stock return. Research limitations/implications Although the authors controlled for some of the factors affecting stock returns, there are still some other factors such as the operating environment, institutional setting and/or information uncertainty that could influence stock returns, and accordingly, the authors were not able to exclude their possibility and get the most robust results. Moreover, there are several models proposed in different studies for measuring earnings quality which have led to mixed results particularly without a general consensus on what a good model is, and whether earnings quality is a priced risk factor. Originality/value Taken as a whole, the paper could provide new insights into the determinants of stock returns which has rarely been considered by prior finance literature. Furthermore, the unique institutional context of the paper could contribute substantially to the literature on the relationship between financial reporting and DQ and stock returns.

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Abdul Fatah, Faizatul Syuhada, and Wan Mansor Wan Mahmood. "Multivariate Causal Estimates of Dividend Yields, Price Earning Ratio and Expected Stock Returns: Malaysian Evidence." GIS Business 14, no. 1 (January 23, 2019): 11–20. http://dx.doi.org/10.26643/gis.v14i1.3254.

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The study examines the relationship among Malaysian’s market stock return, dividend yields and price earnings ratio. Specifically, it examines the existence of long-run and short-run relationship and also their predictive power (causality) between and among market stock return, dividend yields and price earnings. Using the monthly data from 1989-2005, the study finds that all these fundamental variables have a strong long run relationship. As for the short run relationship, the results show significant positive predictive power from dividend yield to stock return and significant negative relation from stock returns to price earning ratios. In addition, applying multivariate causality test, the results show that both dividend yields and price earning ratio Granger cause (predict) the stock return. Similar results are found from stock returns and P/E ratio to dividend yield, as well as from dividend yield and stock returns to P/E ration but with lesser magnitude. Thus, fundamental variables are an important source of information in determining stock market returns and useful to investors and other market participants in deciding their investment strategies. Keywords: Stock return, dividend yield, price earning ratio, Malaysian market.

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Sihombing, Monang Juanda Tua. "Analisis Faktor yang Mempengaruhi Return Saham dengan Kebijakan Deviden sebagai Variabel Moderating pada Perusahaan Consumer Goods." JURNAL ARMADA INFORMATIKA 3, no. 1 (August 1, 2019): 56–69. http://dx.doi.org/10.36520/jai.v3i1.39.

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This study aims to determine and analyze the factors that influence stock returns with dividend policy as a moderating variable simultaneously and partially on consumer goods companies listed on the Indonesia Stock Exchange (IDX). The population of this research is 155 consumer goods companies listed on the IDX. Samples selected using the saturated sampling method amounted to 31 companies. Data were processed using multiple linear regression statistical test methods using SPSS software. The results of this study prove the first hypothesis that the variable current ratio, return on equity, earnings per share, net profit margin, cash flow from operations to debt, inflation and Bank Indonesia interest rates simultaneously influence stock returns. Partially, inflation and interest rates of Bank Indonesia partially affect stock returns, while the current ratio variable, return on equity, earnings per share, net profit margin and cash flow from operations to debt do not affect stock returns. In the results of the research for the second hypothesis, dividend policy is not able to moderate the relationship of current ratio, return on equity, earnings per share, net profit margin, cash flow from operations to debt), inflation and Bank Indonesia interest rates on stock returns. Keywords: current ratio, return on equity, earnings per share, net profit margin, cash flow from operations to debt, inflation, rate interest of Bank Indonesia, dividend policy and stock returns.

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Ahmed, Sheraz. "Corporate ownership, control and the informativeness of disclosed earnings in Russian listed firms." Corporate Ownership and Control 6, no. 2 (2008): 9–24. http://dx.doi.org/10.22495/cocv6i2p1.

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Many problems of corporate governance in Russia are beyond the scope of classical agency theory because of highly concentrated ownership structures. Using ownership and financial dataset from UBS Brunswick, we show that the use of accrual based accounting in Russia has resulted in lower in formativeness of earnings. Opportunistic earnings management hypothesis holds where majority shareholders (controllers) enjoy short-term benefits of manipulating accounting. Interestingly, the returns (net of market) increase when use of discretionary accruals to manage earnings increases in firms controlled by either state or oligarchs. However, such relationship does not exist when ownership is accumulated without control. We also found that state-owned companies use less discretionary accruals than other control groups. We do not find any evidence supporting performance measure hypothesis where firms manage earnings by discretionary accruals to offset the over or under reaction of economic shock. Highly leveraged firms tend to have positive relationship between earnings management and returns, whereas, both size and growth reflect negative informativeness of earnings. The results describe the concentrated ownership structure in Russia where controlling owners not only, achieve personal targets by over or under-statement of disclosed earnings but also get positive response from the market. This market benefit however, can only be achieved with effective control.

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Aryannejad, Nasim, Mohammadhossein Ghaemi, and Keyhan Maham. "The role of earnings management in the relationship between accruals and market value." Investment Management and Financial Innovations 15, no. 1 (March 12, 2018): 236–44. http://dx.doi.org/10.21511/imfi.15(1).2018.20.

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The paper aims to clarify the role of earnings management in the relationship between accruals and the market value of companies. Previous studies suggest that some managers, for providing a desirable image of their performance, manage their profits through distorting cash or accruals. Consequently, investors rely on this information and estimate inaccurate stability of accruals which lead to mispricing phenomenon. Finally, the returns earned by the investors will not be equal to the expected return and thus the accrual anomaly will be created.To this aim, two hypotheses were developed and three regression models were applied to analyze the data. To analyze and estimate the models employed, the financial information of 110 companies listed on the stock exchange between years 2008 to 2014 is used. A selective approach to test the hypotheses is studying cross-sectional data.After conducting statistical tests, the results showed that discretionary accruals through which earnings management is done are improperly valued by the market, but the issue is not applicable regarding the non-discretionary accruals. Based on the close relationship between earnings management and discretionary accruals it can be found that earnings management can have an effect on the relationship between accruals and market value.

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Qin, Lu, and Hongquan Zhu. "Efficiency of heterogeneity measures: an asset pricing perspective." China Finance Review International 5, no. 4 (November 16, 2015): 371–85. http://dx.doi.org/10.1108/cfri-02-2015-0013.

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Purpose – The purpose of this paper is to identify the effective measures for heterogeneity and to uncover the relationship between investor heterogeneity and stock returns. Design/methodology/approach – The paper employs dispersion in analysts’ earnings forecasts and unexpected trading volume as proxies of heterogeneity. Portfolio strategies and Fama-Macbeth regression are used to uncover the relationship between the two proxies and stock returns in the Chinese A-share market. Findings – The result indicates that stock returns are significantly related to unexpected trading volume, i.e., higher unexpected trading volume implies higher stock returns now but lower future stock returns. In contrast, there is no statistically significant relationship between analysts’ forecast dispersion and stock returns. Originality/value – The findings suggest that unexplained trading volume is an effective measure for investor heterogeneity in the Chinese A-share market.

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Vakilifard, Hamidreza, and Masoumeh Sadat Rasouli. "The Relationship between Intellectual Capital and Income Smoothing and Stock Returns." Financial Assets and Investing 4, no. 2 (May 31, 2013): 28–42. http://dx.doi.org/10.5817/fai2013-2-3.

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This article examines the relationship between intellectual capital, income smoothing and stock returns. We are capturing income smoothing through total accruals. Income smoothing firms have significantly higher abnormal returns around earnings announcement. In the knowledge economy, intellectual capital has become one of the primary sources of competitive advantage for a firm. Given the remarkable shift in the underlying production factors of a business within the new knowledge economy, it is important for firms to be aware of the elements of intellectual capital that would lead to value creation. So we associated relationship between intellectual capital and income smoothing and stock returns. The sample includes 108 firm-year observations from 2006 to 2011.We have used five variables

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Draief, Sondes. "The Effect of the Determinants of Accounting Discretion on the Relationship Between Earnings Management and Stock Returns." International Journal of Accounting and Financial Reporting 9, no. 2 (April 15, 2019): 391. http://dx.doi.org/10.5296/ijafr.v9i2.14744.

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This research investigates the effect of the determinants of accounting discretion (beating last year’s earnings, overinvestment problems, growth options, debt, and financial risk) on the relationship between earnings management and stock returns. We use discretionary accruals as a proxy of earnings management.Based on a sample of 486 American firms for the period 2002-2010, our results show that discretionary accruals are positively priced by the market. This relation is even stronger when firms beat last year’s earnings, have higher growth options and increase their debt ratio. Indeed, firms’ accounting manipulations are used, in these circumstances, to convey private information about future prospects and signal good financial situation to external investors. However, discretionary accruals are negatively priced by investors in distressed firms and when overinvestment problems are intense. These firms have greater motivation to use opportunistic earnings management to camouflage the fall of firm value.

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Al-Shattarat, Wasim, and Basiem K. Al-Shattarat. "The Relationship Between Cumulative Abnormal Returns And Earnings: Evidence From Emerging Markets." Journal of Developing Areas 51, no. 2 (2017): 357–68. http://dx.doi.org/10.1353/jda.2017.0050.

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Lento, Camillo, and Naqi Sayed. "Do changes in gross margin percentage provide complementary information to revenue and earnings surprises?" Review of Accounting and Finance 14, no. 3 (August 10, 2015): 239–61. http://dx.doi.org/10.1108/raf-07-2014-0071.

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Purpose – The purpose of this paper is to investigate the association between gross profit percentage, abnormal market returns, revenue surprises and earnings surprises. Gross margin is relied upon by various market participants, as its predictive power is incremental and distinct from revenue and earnings signals; however, gross margin has received little researcher attention. Design/methodology/approach – General regression specifications found in the prior literature are extended to assess the informational content of changes in gross margin percentage. In addition, various portfolios are created based around the nature of the signals (positive or negative), provided by each income statement metrics (revenue, gross margin and earnings). A sample of 5,582 quarterly observations of S & P 500 firms is compiled. The main regressions are exposed to three robustness tests that focus on industry sub-groupings, institutional ownership and fourth-quarter observations. Findings – The main findings reveal that gross margin percentage changes and earnings surprises are significantly related to abnormal market returns in the short window around the earnings announcement date and persist into a wider window measured as the quarter after the earnings announcement date. The relationship between gross margin percentage changes and abnormal returns is more pronounced when positive (negative) changes in gross margin percentage are accompanied by positive (negative) revenue and earnings surprises. Research limitations/implications – This study relies upon S & P 500 firms which are all relatively large firms. Therefore, the results may not be generalizable to smaller firms. In addition, the gross margin change is measured as the quarter-over-quarter percentage change because there is no analyst expectation for gross margin. Originality/value – This paper extends the prior literature by developing three testable hypotheses that investigate the linkages between abnormal market returns, gross margin and revenue and earnings surprises. This is the first known study to investigate the informational content of changes in gross margin percentage.

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Booth, G. Geoffrey, and Ayfer Gurun. "Earnings Smoothing, Momentum and Statistical Arbitrage: Global Evidence." Business and Economic Research 5, no. 2 (June 30, 2015): 48. http://dx.doi.org/10.5296/ber.v5i2.7938.

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We employ the notion of statistical arbitrage to investigate the relationship between earnings smoothing and returns from momentum trading of stocks and explore the role that the level of investor sophistication may play in the smoothing-return calculus. To do so, we exploit the observation that both earnings smoothing and momentum profits are related to the cross-sectional variation in returns. We analyze the relevant data of 25 developed and emerging economies. Our results confirm the proposition that momentum profits as indicated by statistical arbitrage measures are inversely related to earnings smoothing but only in those markets where investors are more sophisticated and are able to take advantage of liquidity traders, who are often uninformed.

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Zhangying, She. "Study on the Relationship Between the Audit Committee of Ipo Firms and the First-Day Stock Earnings." Journal of Finance Research 4, no. 2 (November 3, 2020): 21. http://dx.doi.org/10.26549/jfr.v4i2.3783.

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This paper mainly discusses the relationship between the audit committee of IPO firms and the stock returns on the first day of trading on the stock exchange. Using the sample of 21 firms that made an initial public offering in ASX between 2008 and 2010, Regression analysis was used to conclude that the existence of the audit committee of IPO firms and listed on the first day of the stock returns have no significant direct relationships. The result shows that the audit committee has no effect on the earnings of the first day of listing, and the establishment of the audit committee may not be considered before listing.

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Shin, Jae Eun, Seung-Weon Yoo, and Gun Lee. "The Effects of Blockholder Dispersion on the Informativeness of Earnings: Evidence from Korea." Sustainability 12, no. 22 (November 10, 2020): 9328. http://dx.doi.org/10.3390/su12229328.

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This paper studies the relationship between blockholder dispersion and the informativeness of earnings using a sample of Korean companies. Investors prefer less volatile and more sustainable earnings and managers have incentives to manage earnings to meet investor demand. We show evidence that firms with dispersed ownership, which are likely to suffer from high levels of information asymmetry, smooth earnings in order to relieve investors’ concerns regarding information asymmetry. Furthermore, our regression analyses on the relation between returns and future earnings reveal that earnings smoothing conducted by firms with dispersed ownership leads to higher informativeness of earnings. This study provides important implications for various financial statement users in interpreting firms’ earnings sustainability, especially in the East Asian countries where a wide spectrum of ownership concentration structure exists.

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SELIGMAN, JASON S., and JEFFREY B. WENGER. "Asynchronous risk: retirement savings, equity markets, and unemployment." Journal of Pension Economics and Finance 5, no. 3 (August 23, 2006): 237–55. http://dx.doi.org/10.1017/s1474747206002630.

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Retirement savings in defined contribution plans vary as a result of the timing and frequency of unemployment spells. We hypothesize that unemployment is coincident with negative shocks to equities prices, implying workers may systematically miss investment opportunities. First we match historic stock returns to unemployment hazards by gender, and earnings quartile. Next we test the relationship between unemployment, equity returns, and pension savings, by repeated simulation. Finally, we find that the timing of unemployment spells amplifies retirement savings losses on average for all worker-types in our analysis. Timing impacts are observed to be largest for high earnings workers and to increase with unemployment losses disproportionately.

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Draief, Sondes. "Earnings Management Incentives and the Pricing of Discretionary Accruals." International Journal of Business and Management 14, no. 7 (June 8, 2019): 77. http://dx.doi.org/10.5539/ijbm.v14n7p77.

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The objective of this research is to investigate whether earnings management incentives influence the pricing of discretionary accruals. Specifically, we verify if growth opportunity, leverage, free cash flow, insider trading and financial distress are useful to investors to discriminate between opportunistic and informative earnings management. Using a sample of 486 American firms for the period 2002-2010, we find that discretionary accruals are positively related to stock returns. This relation is more intensive in high growth firms and high levered firms. Indeed, these firms use more informative earnings management to communicate future prospects and good financial situation to external investors. However, discretionary accruals are negatively priced by investors in distressed firms. These firms have a greater incentive to manage earnings opportunistically to hide any financial problem. Likewise, we detect a negative relationship between discretionary accruals and stock returns in firms with excessive free cash flow revealing the opportunistic perspective of earnings management. Finally, we demonstrate that investors award positive (negative) value to discretionary accruals in case of insider buying (selling).

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Ozturk, Hakki, and Tolun A. Karabulut. "Impact of financial ratios on technology and telecommunication stock returns: evidence from an emerging market." Investment Management and Financial Innovations 17, no. 2 (May 18, 2020): 76–87. http://dx.doi.org/10.21511/imfi.17(2).2020.07.

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This study focuses on the relationship between financial ratios and the technology and telecommunication stock returns listed on the Istanbul Stock Exchange. Since technology and telecommunication sector has become an important part of the Turkish economy and is attractive for investors and shareholders, the results play a critical role for all stakeholders. This academic work aims to determine, through the application of panel data analysis, using both the Parks-Kmenta estimator and the Two-way Mixed Effects Model, whether the Price-to-Sales, Earnings per Share (EPS), Debt-to-Equity, and EBITDA Margin financial ratios affect the returns of technology and telecommunication stock returns listed on the Istanbul Stock Exchange. According to empirical findings, Earnings per Share (EPS), EBITDA Margin, and Price-to-Sales ratios have statistically significant effects on technology and telecommunication companies’ stock returns. Higher EPS and EBITDA Margin ratios generate higher returns for the next quarters, and lower Price-to-Sales ratios lead to higher returns for the following periods. Furthermore, the results obtained using the Two-way Mixed Effects Model show that the Debt-to-Equity ratio is negatively related to stock returns.

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Omush, Ahmed M. Al, Walid M. Masadeh, and Rasha M. Zahran. "The Impact of Earnings Management on Stock Returns for Listed Industrial Firms on the Amman Stock Exchange." Business and Economic Research 9, no. 3 (July 2, 2019): 1. http://dx.doi.org/10.5296/ber.v9i3.15011.

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This study aims to investigate the impacts of earning management on the stock returns of listed industrial firms on the Amman Stock Exchange, with the observance of (firm size and operating cash flow) as control variables for the study. In order to fulfill the purposes of this study, the researcher utilized (Jones model) and (Modified Jones model) to measure earning management through reliance on discretionary accruals as evidence of earnings management practices, and utilize (Market Return On the Stock model) to measure stock returns, and the study population was Mining and Extraction Industries firms also Food and Beverages firms listed in Amman Stock Exchange, the study was conducted on a sample of 18 firms which represents 75% of the study population for the period from 2014 to 2018, In addition to using descriptive and analytical approach to data collection, analysis, and testing hypotheses through financial statements of the firms in the study, the researcher has used the Statistical Package for Social Sciences (SPSS) program to test the hypotheses. This study creates many results some of which are: there is an insignificant relationship between earnings management practices and stock returns for listed industrial firms in Amman Stock Exchange during the study period at the significance level of 5%, Which reflects the poor efficiency in Amman Stock Exchange and not the information contained in the financial statements issued and therefore not impact stock prices, which in turn affects the stock returns, and there is an insignificant relationship between stock returns and operating cash flow at the level of significance of 5%, In addition found significant correlation between firm size and stock returns at the significance level of 1%. The researcher presented a set of recommendations; the following are most valuable: the importance of increasing the awareness of the relevant parties about the unreliability of financial statements issued by industrial companies listed on the Amman Stock Exchange in existence of the earnings management practice and not reflecting the information contained in the financial statements on prices and stock returns by holding seminars, conferences and meetings also Activating the role of audit committees further to be able to detect the practice of earnings management and decrease it.

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Rifin, Nurul Syakirah, Salwana Hassan, Nordin Abu Bakar, and Zahariah Sahudin. "A Comparative Analysis Between Shariah-Compliant & Non-Shariah Compliant Stocks." Journal of Emerging Economies and Islamic Research 7, no. 3 (September 30, 2019): 26. http://dx.doi.org/10.24191/jeeir.v7i3.6944.

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The study reported by this paper investigated the behaviour of stock returns among Shariah-compliant firms and non-Shariah compliant firms of service industry in Malaysia. The data of 50 firms listed in Bursa Malaysia were obtained from 2008 to 2012. It focused on the relationship between the stock returns and the financial ratios (firm size, market to book ratio, price-earnings ratio and total debt) as the microeconomic variables. While the gross domestic product (GDP), interest rate and inflation rate as the macroeconomic variables toward the stock return. Using regression analysis applying OLS technique, the results showed a significant similarity between Shariah-compliant firms and their counterparts. For Shariah-compliant firms, it is found that firm size and total debt is the most significant variables explaining returns, on the other hand, for non-Shariah compliant firms, price-earnings ratio, interest rate and inflation rate are the most significant variables influencing returns.

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Kim, Chong-Sup, and Hyun-Jung Je. "The effect of export portfolio on export earnings and risks." Journal of Korea Trade 20, no. 2 (June 6, 2016): 118–33. http://dx.doi.org/10.1108/jkt-04-2016-0006.

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Purpose – The purpose of this paper is to assess a country’s export returns and return volatility and to demonstrate that such an approach is a relevant method to predict a country’s export earnings and risks. Also to suggest important policy implications for Korea’s trade in terms of diversifying its export structure of products and destinations. Design/methodology/approach – The modern portfolio theory by Markowitz (1959) is applied to predict a country’s export earnings and risks. The import amount of a product, which includes aspects of both price and volume, is used as a measure of returns and return volatility and, as a result, the correlation matrix between 19 product groups covering almost all the export goods is calculated. The empirical analysis to show a strong causal relationship between expected returns and the return volatility of a country’s export portfolio and its real export earnings and risks is also made. Findings – This study demonstrates that the portfolio approach can be a useful method to predict export returns. Also suggests that Korea needs to change its portfolio of both export products and destinations in order to maintain more stable growth of its trade and reduce its vulnerability to an external shock. Research limitations/implications – The empirical tests have many limitations because they are based on simple cross-sectional models. Practical implications – The study shows that the modern portfolio approach to export by using prices and volume as a measure of variation in returns can predict how vulnerable a country’s export earnings is to economic shocks, and thus, provide a useful policy implication in the design of export structure and resource allocation. Originality/value – This study provides a new idea to predict a country’s export earnings and risks by applying the export portfolio.

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sadeghi batani, abolfazl, ali souri, and ebrahim eltejaei. "The Investigation of Relationship between Diversion Earnings Forecasts From Earnings Realized and Returns Stocks in Tehran Stock Exchange." Journal of Research in Economic Modeling 7, no. 26 (March 1, 2017): 111–39. http://dx.doi.org/10.18869/acadpub.jemr.7.26.111.

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Chong, Terence Tai Leung, Yueer Wu, and Jue Su. "The Unusual Trading Volume and Earnings Surprises in China’s Market." Journal of Risk and Financial Management 13, no. 10 (October 16, 2020): 244. http://dx.doi.org/10.3390/jrfm13100244.

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This study examines the empirical relationship between unusual trading volume and earnings surprises in China’s A-share market. We provide evidence that an unusually low trading volume can signify negative information about firm fundamentals. Moreover, unusual trading volumes could predict abnormal returns close to the earnings announcement date. The degree of, and changes in, divergence of opinion could explain this result. Our study provides an insight into China’s market, where short sales are strictly forbidden. We report a strong relationship that is quite different from that described in most studies on the United States market.

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Akhavi Babi, Mehri. "The effects of financial risks on the relationship between earnings and stock returns." International Journal of Organizational Leadership 4, no. 2 (April 1, 2015): 154–69. http://dx.doi.org/10.33844/ijol.2015.60379.

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Mashoka, Tareq Z. "The Relationship between Earnings and Stock Returns on the Market and Sector Levels." Dirasat : Administrative Sciences 40, no. 2 (July 2013): 555–64. http://dx.doi.org/10.12816/0002657.

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Balachandran, Sudhakar, and Partha Mohanram. "Using residual income to refine the relationship between earnings growth and stock returns." Review of Accounting Studies 17, no. 1 (August 19, 2011): 134–65. http://dx.doi.org/10.1007/s11142-011-9168-1.

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Myring, Mark. "The relationship between returns and unexpected earnings: A global analysis by accounting regimes." Journal of International Accounting, Auditing and Taxation 15, no. 1 (January 2006): 92–108. http://dx.doi.org/10.1016/j.intaccaudtax.2006.01.006.

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Ghosh, Aloke, and Doocheol Moon. "Auditor Tenure and Perceptions of Audit Quality." Accounting Review 80, no. 2 (April 1, 2005): 585–612. http://dx.doi.org/10.2308/accr.2005.80.2.585.

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We analyze how investors and information intermediaries perceive auditor tenure. Using earnings response coefficients from returns-earnings regressions as a proxy for investor perceptions of earnings quality, we document a positive association between investor perceptions of earnings quality and tenure. Further, we find that the influence of reported earnings on stock rankings becomes larger with extended tenure, although the association between debt ratings and reported earnings does not vary with tenure. Finally, we find that the influence of past earnings on one-year-ahead earnings forecasts becomes greater as tenure increases. In general, our results are consistent with the hypothesis that investors and information intermediaries perceive auditor tenure as improving audit quality. One implication of our study is that imposing mandatory limits on the duration of the auditor-client relationship might impose unintended costs on capital market participants.

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Brandon, Rajna Gibson, and Songtao Wang. "Earnings Belief Risk and the Cross-Section of Stock Returns*." Review of Finance 24, no. 5 (January 17, 2020): 1107–58. http://dx.doi.org/10.1093/rof/rfaa001.

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Abstract We show in a theoretical asset pricing model incorporating heterogeneous beliefs that the expected excess return on a risky asset depends on its exposure to the risk arising from innovations in the average belief of investors about the expected return of a representative asset. Using the actual EPS data and the analyst EPS forecast data provided by I/B/E/S, we construct a market-wide average belief measure, which we call “the earnings belief measure.” We find that the average return on stocks with high sensitivity to earnings belief shocks is 7.14% per year higher than that on stocks with low sensitivity. This positive relationship holds after accounting for traditional risk factors, is prominent among large-cap stocks, and is invariant across sentiment levels.

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Humeedat, Mohammad M. "Earnings Management to Avoid Financial Distress and Improve Profitability: Evidence from Jordan." International Business Research 11, no. 2 (January 29, 2018): 222. http://dx.doi.org/10.5539/ibr.v11n2p222.

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Due to unstable economic and political conditions, many companies in the Middle East are undergoing various financial distress and decline in profitability. This paper examines the role of earnings management to avoid financial distress and improve profitability in 58 industrial corporations listed on Amman Stock Exchange for a period of 2011 to 2016, which constitutes 89% of the whole population. The total number of observations is 413 for the entire study period. The study uses a cross-sectional Jones model that was modified by (Kothari, Leone, and Wasley, 2005); to measuring discretionary accruals that used as a proxy for earnings management.The empirical results indicate that earning management is not affected by the Altman’s Z-score index, but it has a positive relationship with debt to equity ratio. This study also shows a positive relationship between earnings per share, returns on equity, and earnings management. Regarding the control variable, we found a negative relationship between cash flow from operation and discretionary accruals.

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Dang, Ngoc Hung, Thi Viet Ha Hoang, and Manh Dung Tran. "The Relationship Between Accounting Information in the Financial Statements and the Stock Returns of Listed Firms in Vietnam Stock Exchange." International Journal of Economics and Finance 9, no. 10 (August 28, 2017): 1. http://dx.doi.org/10.5539/ijef.v9n10p1.

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This study is conducted to analyse the relationship between accounting information in the financial statements and the stock returns of listed firms in Vietnam Stock Market. Using OLS, FEM, REM, GLS, and GMM regression models, the study examines the relationship of earnings, volatility in the rate of return, size, levering ratios and growth rates to the stock returns of 274 firms in the period from 2012 to 2016. Findings from the study show that the rate of return, the change in the rate of return, gearing ratio and growth rate are positively correlated to the stock returns, while the size of firm by assets is negatively related to stock returns. Based on the research’s results, the authors also provide some recommendations for investors, firm management and policy makers.

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Page, Michael J., and Francis Palmer. "The relationship between excess returns, firm size and earnings on the Johannesburg Stock Exchange." South African Journal of Business Management 22, no. 3 (September 30, 1991): 63–73. http://dx.doi.org/10.4102/sajbm.v22i3.900.

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While considerable empirical work has been conducted in the United States concerning excess returns and the relationship of these returns to firm size and E/P ratio, thus far, there have been few similar empirical studies conducted using Johannesburg Stock Exchange (JSE) data. Evidence of firm size or E/P ratio effects has been ascribed by various authors to either model misspecification or market inefficiencies. In this article the evidence is examined for the South African market using 1370 company years of data over the period 1978 to 1988, and a significant earnings effect is found, but no size effect. In the analysis the problem of data bias is considered with particular emphasis on thin trading issues, and a methodology for future empirical work is described. Finally, it is suggested that the evidence can be better explained by market inefficiencies than model misspecification.

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Journal articles on the topic 'Returns-earnings relationship'

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