Firms' Stock Prices, Stock Returns, and Remaining Lifetime Earnings

• 成果类型: Article
• 署名作者: Bhojraj, Sanjeev; Ochani, Ashish; Rajgopal, Shiva
• 署名单位: Cornell University; University of Calgary; Columbia University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.03251
• 发表日期: 2026
• 关键词: lifetime; earnings; stock returns; Wealth creation; mergers; ipos

摘要

We document the disconnect between earnings expectations as captured in stock prices and the ultimate realization of earnings over long periods. To do so, we compare firms' stock prices on the first trading day and the beginning of each year to the realized earnings over their remaining lifetime (RLTEP ratio). We document that the RLTEP ratio, averaged over long periods and over 15,000 U.S. domestic public firms, approximates one, suggesting that expectations match actuals in the aggregate. However, most firms fail to deliver an RLTEP ratio greater than one. Acquisition prices are the largest contributors to the RLTEP ratio, with many surviving firms failing to generate enough earnings even after operating for between 15 and 45 years. The RLTEP ratio for survivors is positively associated with the future RLTEP ratio, future lifetime wealth creation, and future lifetime stock returns. Significant returns-based wealth creation by firms in the short term does not persist in the long term unless it is supported by fundamental wealth creation (high past RLTEP ratio).