Premium
Asymmetric Market Reactions of Growth and Value Firms with Management Earnings Forecasts *
Author(s) -
Chan H.,
Faff R.,
Ho Y. K.,
Ramsay A.
Publication year - 2006
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/j.1468-2443.2007.00060.x
Subject(s) - earnings , earnings growth , earnings surprise , value (mathematics) , post earnings announcement drift , surprise , economics , monetary economics , econometrics , business , financial economics , earnings per share , accounting , statistics , mathematics , social psychology , psychology
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.