Expectations Management and Stock Returns

• 成果类型: Article
• 署名作者: Johnson, Travis L.; Kim, Jinhwan; So, Eric C.
• 署名单位: University of Texas System; University of Texas Austin; Stanford University; Massachusetts Institute of Technology (MIT)
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz141
• 发表日期: 2020
• 页码: 4580
• 关键词: cross-section; earnings announcements; CONTRARIAN INVESTMENT; ANALYST COVERAGE; INFORMATION; performance; incentives; seasonality; forecasts; turnover

摘要

We establish a link between firms managing investors' performance expectations, earnings announcement premiums, and cyclical patterns (i.e., seasonalities) in returns. Firms that are more likely to manage expectations toward beatable levels predictably earn lower returns before, and higher returns during, their earnings announcements. This pattern repeats across firms' fiscal quarters, suggesting firms manufacture positive surprises by negatively biasing investors' expectations ahead of announcing earnings. We corroborate these findings using non-price-based outcomes indicative of expectations management. Together, our findings are consistent with the pressure for firms to meet earnings targets shaping the cross-section of firms' stock returns.