Earnings response coefficient

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Earnings response coefficient

A measure of relation of stock returns to earnings surprises around the time of corporate earnings announcements.

Earnings Response Coefficient

The relationship between a change in a company's stock price and any unusual statements in a company's earnings announcement. Unexpectedly high earnings can create a buying panic and while low earnings can create a selling panic. This can drive the stock price up or down. Arbitrageurs use the earnings response coefficient to estimate how much the price may change and make decisions on how to exploit the pricing inefficiency. See also: Capital Asset Pricing Model, Arbitrage.
References in periodicals archive ?
Table 2 indicates the earnings response coefficients for the sample of study firms.
The effect of financial statement comparability on future earnings response coefficients. Journal of Accounting and Auditing Review, 22(4), 479-500.
Pincus (2000), Internal versus external equity funding sources and earnings response coefficients. Review of Quantitative Finance and Accounting, Volume 16(1), pp.
Sustained earnings and revenue growth, earnings quality, and earnings response coefficients. Review of Accounting Studies, 10(1), 33-57.
The results showed the increased ability of the price and return models to explain better earnings-return relationship by providing highly significant earnings response coefficients. Furthermore, after correcting value-irrelevant noise in earnings, the return model yields highly significant ERCs.
The effects of backdating on earnings response coefficients. (University of Nebraska-Lincoln Working Paper).
Sloan, 1992, "Information in Prices About Future Earnings: Implications for Earnings Response Coefficients," Journal of Accounting and Economics 15, 143-171.
Jeter, 1992, "The Effect of Size on the Magnitude of Long-window Earnings Response Coefficients," Contemporary Accounting Research 8, 540-560.
Analysis of Intertemporal and Cross-Sectional Determinants of Earnings Response Coefficients. Journal of Accounting And Economics, 11, 143-181.
Noisy accounting earnings signals and earnings response coefficients: The case of foreign currency accounting.
We also find a significant positive association between the six measures of auditor industry specialization and clients' earnings response coefficients. The negative association observed between auditor industry specialization and clients' absolute discretionary accruals suggests that on average specialist auditors reduce earnings management by their clients.