Does it Pay to Consistently Meet Analysts' Earnings Expectations?

43 Pages Posted: 22 Jan 2003

See all articles by Gia Chevis

Gia Chevis

Baylor University - Hankamer School of Business

Somnath Das

University of Illinois at Chicago

Shiva Sivaramakrishnan

Rice University

Date Written: September 2007

Abstract

In this paper, we investigate the market reward to firms that consistently meet or exceed analysts' consensus forecasts over the entire horizon over which a pattern of consistent meet/beat is exhibited. Our results support the existence of a positive market response over the entire horizon. We document that this incremental valuation premium increases with the length of the strategy horizon over which MEET behavior persists, and that MEET firms enjoy significantly higher valuations of income and book value of equity than do NONMEET firms. Finally, we document that there has been a temporal shift in the way the market values the MEET strategy in that there is greater premium (penalty) for meeting /beating (missing) of earnings expectations.

Keywords: Analysts, Earnings Forecasts, Valuation, Expectation Management, Earnings Management, Self-selection

JEL Classification: G14, G14, G29, M41

Suggested Citation

Chevis, Gia Marie and Das, Somnath and Sivaramakrishnan, Shiva, Does it Pay to Consistently Meet Analysts' Earnings Expectations? (September 2007). Available at SSRN: https://ssrn.com/abstract=982841 or http://dx.doi.org/10.2139/ssrn.982841

Gia Marie Chevis

Baylor University - Hankamer School of Business ( email )

One Bear Place #98002
Waco, TX 76798
United States
254-710-1328 (Phone)
254-710-1067 (Fax)

Somnath Das

University of Illinois at Chicago ( email )

601 South Morgan Street
University Hall, Room 2303
Chicago, IL 60607
United States
312-996-4482 (Phone)
312-996-4520 (Fax)

Shiva Sivaramakrishnan (Contact Author)

Rice University ( email )

6100 South Main Street
Houston, TX 77005-1892
United States

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