|Appears in Collections:||Accounting and Finance Journal Articles|
|Peer Review Status:||Refereed|
|Title:||Loss firms' annual report narratives and share price anticipation of earnings|
|Citation:||Schleicher T, Hussainey K & Walker M (2007) Loss firms' annual report narratives and share price anticipation of earnings, British Accounting Review, 32 (9), pp. 153-171.|
|Abstract:||We extend prior research into the association between disclosure quality and share price anticipation of earnings by discriminating between firms that report profits and firms that report losses. As a measure of disclosure quality we count the number of forward-looking profit statements in annual report narratives. To measure the extent to which current share price movements anticipate future earnings changes we regress current stock returns on current and future earnings changes. The coefficients on the future earnings change variables are our measure of share price anticipation of earnings. Our regression results show that the association between annual report narratives and share price anticipation of earnings is not the same for profit and loss firms. For loss firms we find that the ability of stock returns to anticipate next period’s earnings change is significantly greater when the firm provides a large number of profit predictions in annual report narratives. We make no such observation for profit firms. In addition, once we control for variations in the intrinsic lead-lag relation between returns and earnings across industries, the observed difference between profit and loss firms becomes statistically significant. Overall, our results are consistent with annual report narratives being a particularly important source of information for loss-making firms.|
|Rights:||Published in British Accounting Review by Elsevier|
|Affiliation:||University of Manchester|
Accounting and Finance
University of Manchester
This item is protected by original copyright
Items in the Repository are protected by copyright, with all rights reserved, unless otherwise indicated.
If you believe that any material held in STORRE infringes copyright, please contact firstname.lastname@example.org providing details and we will remove the Work from public display in STORRE and investigate your claim.