Meeting or Beating Analysts’ Forecasts: Empirical Evidence of Firm’s Characteristics, and Persistence Patterns

Meeting or Beating Analysts’ Forecasts: Empirical Evidence of Firm’s Characteristics, and Persistence Patterns

Focusing on the MBE (meeting or beating analysts’ forecast) phenomenon,this study primarily investigates the way market responds to a firm’s repeated MBE and to its first failure to meet analysts’ forecast after a long string of MBE. The paper also asks whether the market’s reaction to the MBE patterns has changed after the regulatory reform including the Sarbanes-Oxley Act and investigates the properties of habitual MBE firms. The results show the market rewards persistent MBE firms and that it seems to efficiently interpret a systematic portion of earnings surprise for habitual beaters. They also document that the post-SOX stock market premium to MBE has not completely diminished and that MBE patterns are strongly associated with firm characteristics.

Focusing on the MBE (meeting or beating analysts’ forecast) phenomenon,this study primarily investigates the way market responds to a firm’s repeated MBE and to its first failure to meet analysts’ forecast after a long string of MBE. The paper also asks whether the market’s reaction to the MBE patterns has changed after the regulatory reform including the Sarbanes-Oxley Act and investigates the properties of habitual MBE firms. The results show the market rewards persistent MBE firms and that it seems to efficiently interpret a systematic portion of earnings surprise for habitual beaters. They also document that the post-SOX stock market premium to MBE has not completely diminished and that MBE patterns are strongly associated with firm characteristics.