Product competitiveness and beating analyst earnings target
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While Wall Street closely watches financial analysts’ earnings forecasts, Main Street often scrutinizes product quality relative to competition. Do firms with superior product competitiveness enjoy greater likelihood of beating analyst earnings target? And if so, is there contingency in this impact? We show that positive changes in product competitiveness contribute to the firm’s likelihood of beating analyst earnings target, while negative changes in product competitiveness account for missed earnings target. In addition, this impact of product competitiveness on the likelihood of beating analyst earnings target is more positive in the situations of high firm future growth opportunity and low financial environment uncertainty. These findings innovatively use analyst forecast metrics to reinforce the relationship between product quality, competitive advantage, and financial performance. Our study also cultivates a contingency theory of the marketing-finance interface and allows marketing and finance executives to find common ground in strategic discourse. Overall, this research offers brand new financial analysts-based implications of product competitiveness.
KeywordsProduct quality Competition Financial analysts Earnings forecast Stock prices Marketing strategy
The author gratefully acknowledges finance colleagues (de Jong Pieters, Giao Nguyen, Shi Jian, and Yong Li) and marketing colleagues (Don Lehmann, Dominique Hanssens, Gerry Tellis, Shuba Srinivasan, Ross Rizley, Tien Wang, Jin Woo Kim, and Alina Sorescu) for their excellent assistance and/or constructive insights.
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