Business, Management and Accounting
3 years ago

Prior quarter earnings crucial for stock returns and future performance!

Journal of Business Finance &amp Accounting
Quarterly earnings thresholds: Making the case for prior quarter earnings
Sanghyuk Byun, Kristin C. Roland

Paper Summary

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The prior quarter's earnings number is an important benchmark that managers pay attention to. They try to avoid negative changes compared to the previous quarter. Even after considering other benchmarks like analysts' forecasts, changes in prior quarter earnings affect stock returns. This effect is stronger after certain regulations were put in place. Companies with more stable earnings benefit more from meeting or beating prior quarter earnings, which is linked to future success.