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The impact of strategic interaction on earnings expectations associated with corporate product strategies

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  • Chen, Sheng-Syan
  • Chen, Po-Jung
  • Lin, Wen-Chun
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    Abstract

    We examine how strategic interaction in an industry influences the earnings expectations of financial analysts with regard to new product strategies. We find that following announcement of new products, analysts revise earnings forecasts upward more for announcing firms competing in low-strategic interaction industries than for firms competing in high-strategic interaction industries. For value-enhancing (value-reducing) product strategies, earnings forecast revisions are more favorable for rivals competing under a high (low) degree of strategic interaction than for rivals competing under a low (high) degree of strategic interaction. Overall empirical evidence indicates that the nature of strategic competition within the industry is important in assessing the market expectations of earnings for new product announcers and their rivals.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 36 (2012)
    Issue (Month): 1 ()
    Pages: 66-77

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    Handle: RePEc:eee:jbfina:v:36:y:2012:i:1:p:66-77

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Strategic interaction; Financial analyst; Forecast revision; New product strategy;

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