Earnings benchmark hierarchy. (6th May 2015)

• Record Type: Journal Article
• Authors: Carvajal, Mariela; Coulton, Jeffrey J.; Jackson, Andrew B.
• Editors: Smith, Tom
• Is Part Of: Accounting and finance. Volume 57:Number 1(2017)
• Page Start: 87
• Page End: 111
• Publication Date: 2015-05-06
• Subjects: Analyst forecasts -- Earnings benchmarks -- Thresholds -- Valuation; Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12132
• Languages: English
• ISSNs: 0810-5391

Abstract

Abstract: We examine the hierarchy of earnings benchmarks in Australia. Our results demonstrate a disconnect between the actions managers appear to take and the market reaction to firms exceeding or just missing earnings benchmarks. The actions of managers appear consistent with them acting in a manner to avoid making losses and earnings decreases. On the other hand, the market reacts in a manner where the analysts' earnings forecast is at the top of the earnings benchmark hierarchy. However, for firms without analyst coverage, the reporting of positive earnings is the predominant earnings benchmark.