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Non‐operating earnings and firm risk

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  • Surendranath Jory
  • Thanh Ngo
  • Hongxia Wang

Abstract

We find that non‐operating earnings reduce total earnings volatility, stock price volatility, idiosyncratic risk, and crash risk. The risk‐reducing effects of non‐operating earnings are higher than those of operating earnings for risk measures based on stock market data. Non‐operating earnings serve to mitigate risks among firms with operating losses, high financial leverage, high growth uncertainty, and low‐ability managers.

Suggested Citation

  • Surendranath Jory & Thanh Ngo & Hongxia Wang, 2021. "Non‐operating earnings and firm risk," Review of Financial Economics, John Wiley & Sons, vol. 39(1), pages 95-123, January.
    • Handle: RePEc:wly:revfec:v:39:y:2021:i:1:p:95-123
    DOI: 10.1002/rfe.1111
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