City Research Online

Industry Effects on Firm and Segment Profitability Forecasting

Schröder, D. and Yim, A. (2018). Industry Effects on Firm and Segment Profitability Forecasting. Contemporary Accounting Research, 35(4), pp. 2106-2130. doi: 10.1111/1911-3846.12361

Abstract

Academics and practitioners have long recognized the importance of a firm’s industry membership in explaining its financial performance. Yet, contrary to conventional wisdom, recent research shows that industry-specific profitability forecasting models are not better than economy-wide models. The objective of this paper is to further explore this result and to provide insights into when and why industry-specific profitability forecasting models are useful. We show that industry-specific forecasts are significantly more accurate in predicting profitability for single-segment firms and, to some extent, for business segments. For multiple-segment firms, the aggregation of segment-level data for external reporting of firm-level financials obliterates the industry effects of their segments.

Publication Type: Article
Additional Information: This is the peer reviewed version of the following article: Schröder, D. & Yim, A. (2017). Industry Effects on Firm and Segment Profitability Forecasting. Contemporary Accounting Research, which has been published in final form at http://dx.doi.org/10.1111/1911-3846.12361. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Publisher Keywords: Industry membership, Profitability forecasting, Disaggregation, Segment disclosure
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
Date available in CRO: 29 Apr 2016 13:27
Date deposited: 14 August 2017
Date of acceptance: 9 August 2017
Date of first online publication: 26 October 2017
URI: https://openaccess.city.ac.uk/id/eprint/14472
[img]
Preview
Text - Accepted Version
Download (670kB) | Preview

Export

Downloads

Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login