An Evaluation of the Return-Earnings Research
Capital markets research in accounting began with inquiries into the relation between equity return and accounting earnings. The collective efforts made by numerous researchers over the past four decades or so have produced a vast body of work on this topic, which is commonly known as the “ERC” (earnings response coefficient) literature. In this chapter, we firstly give a brief account of this research and evaluate it in the context of the return model developed in Chap. 9. Previously, Lev (1989) and Kothari (2001), and others have surveyed and evaluated this literature at its various stages, but not in relation to a specific theoretical model.
KeywordsAbnormal Return Earning Announcement Future Earning Return Model Earning Report
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