An Empirical Analysis of Firms that Meet or Exceed Analysts' Earnings Forecasts
Authors:
- Gia Marie ChevisGCGia Marie Chevis
- Somnath DasSDSomnath Das
- K. SivaramakrishnanKSK. Sivaramakrishnan
Preprint
- 30 April 2001
- preprint
- Published by Elsevier in SSRN Electronic Journal
Abstract
We study the characteristics of firms that consistently meet or exceed analysts' expectations over a long time period spanning multiple quarters (MEET firms). We find that MEET firms are more likely to be firms with higher growth, a pattern of increasing earnings, a larger analyst following, lower forecast dispersion among analysts, and greater earnings stability. We also find that the price-earnings multiple is on average higher for profit MEET firms, conditional on other known cross-sectional determinants of price-earnings relationships such as growth, leverage, and a pattern of increasing earnings. The MEET firms that are most likely to have guided analysts in our sample are systematically different in growth and performance characteristics relative to (i) firms that are less likely to engage in such behavior, and (ii) NONMEET firms. Our results suggest that the market discerns and discounts such expectations management behavior.Keywords
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