Firms with Inconsistently Signed Earnings Surprises: Do Potential Investors Use a Counting Heuristic?

• 成果类型: Article
• 署名作者: Koonce, Lisa; Lipe, Marlys Gascho
• 署名单位: University of Texas System; University of Texas Austin; University of South Carolina System; University of South Carolina Columbia
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12235
• 发表日期: 2017
• 页码: 292-313
• 关键词: DECISION-MAKING; frequency; INFORMATION; availability; expectations; thresholds; management; judgments; beliefs; rewards

摘要

Although prior research reports that firms that consistently beat their earnings expectations are rewarded with a market-valuation premium, most firms are inconsistent in the sign of their benchmark performance, sometimes missing and sometimes beating. In this paper, we report the results of multiple experiments to test the idea that potential investors, evaluating firms that have inconsistent benchmark performance, use a counting heuristic to discriminate among them. Our results provide strong support for the hypothesis that these investors distinguish among firms by counting the number of beats and misses they experience over an observed time interval. The judgmental effect of this beat-frequency is incremental to the effect of the magnitude of the beats and misses of the benchmark. Our study has implications for firm managers who have inconsistent benchmark performance, suggesting that market participants do make systematic discriminations among such inconsistent firms. It also has implications for researchers by introducing a new theoretical construct to the literature-namely, the counting heuristic.