City Research Online

Abstract

This study examines when accounting surprises other than the street EPS surprise, i.e., ‘other surprises’, are useful to investors. First, ‘other surprises’ are incrementally important when companies use earnings management to beat the analyst consensus EPS forecasts and when earnings quality is low. Second, ‘other surprises’ are useful in interpreting quarterly results for (i) growth stocks, (ii) stocks with high institutional ownership (particularly by active institutions and blockholders), and (iii) in interpreting the quality of the street EPS surprise. Third, the street EPS surprise shows no association with earnings announcement returns controlling for ‘other surprises.’ This result reflects that some ‘other surprises’, such as the net income surprise, are better predictors of future earnings surprises than the street EPS surprise.

Publication Type:	Article
Additional Information:	This is an Accepted Manuscript of an article to be published by Taylor & Francis in Accounting and Business Research, to be available at: https://www.tandfonline.com/toc/rabr20/current
Publisher Keywords:	earnings announcements, earnings announcement puzzle, unexpected news, non-street EPS surprises
Subjects:	H Social Sciences > HF Commerce > HF5601 Accounting
Departments:	Bayes Business School Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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