The market's reaction to changes in relative performance rankings

• 成果类型: Article
• 署名作者: Jennings, Jared; Seo, Hojun; Soliman, Mark T.
• 署名单位: Washington University (WUSTL); National University of Singapore; University of Southern California
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-020-09532-1
• 发表日期: 2020
• 页码: 672-725
• 关键词: earnings management; pro forma; predictive-value; gaap earnings; persistence; determinants; forecasts; revenue

摘要

The media commonly gauges a firm's performance by comparing its performance to others within the same industry. We provide evidence that investors and analysts positively value improvements to the firm's relative performance ranking (RPR) within its industry. Consistently, RPR is positively associated with the firm's earnings persistence, which suggests that RPR provides information about the firm's ability to capture profits within the industry. We also find that managers use non-GAAP exclusions from earnings to improve the appearance of the firm's RPR and that not all the information found in the firm's performance ranking is priced by investors at the time of the earnings announcement. This evidence suggests that investors and analysts use the entire distribution of earnings to evaluate a firm's performance, allowing us to identify an alternative benchmark not previously explored.