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Earnings Forecasts and the Information Contained in Spinoff Announcements
Author(s) -
Best Ronald W.,
Best Roger J.,
Agapos A. M.
Publication year - 1998
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1998.tb01382.x
Subject(s) - earnings , post earnings announcement drift , business , term (time) , economics , earnings response coefficient , accounting , physics , quantum mechanics
This study examines spinoff announcements in conjunction with financial analysts’ forecasts of earnings. The analysis shows that spinoff announcement abnormal returns are significantly related to the firm's information environment as proxieci by financial analysts’ earnings prediction errors. The findings also indicate that analysts significantly increase their short‐term earnings forecasts in response to spinoffs, but do not significantly revise their long‐term earnings forecasts. However, the earnings revisions are not significantly different across prediction error groups, which confirms that spinoff‐related abnormal returns cannot be attributed solely to expected performance gains.