Abstract
We examine market reactions to contemporaneous announcements of current earnings and future earnings guidance for evidence on how investors trade off relevance and reliability. Current earnings are more reliable than future earnings guidance, but future earnings guidance may be more relevant for predicting future performance. We find that current earnings are more strongly associated with announcement-period returns than concurrently disclosed future earnings guidance, consistent with investors’ relative preference for reliability. We find similar return reactions to stand-alone earnings and to earnings released with guidance. In contrast, return reactions are lower for guidance announced simultaneously with current earnings than for stand-alone guidance.
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Atiase, R.K., Li, H., Supattarakul, S. et al. Market Reaction to Multiple Contemporaneous Earnings Signals: Earnings Announcements and Future Earnings Guidance. Rev Acc Stud 10, 497–525 (2005). https://doi.org/10.1007/s11142-005-4211-8
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DOI: https://doi.org/10.1007/s11142-005-4211-8
Keywords
- multiple contemporaneous earnings signals
- future earnings guidance
- earnings announcements
- relevance
- reliability
- market reaction