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Stock Return or Sales Growth? Multiple Performance Feedback and Strategic Investments Under Securities Analysts’ Earnings Pressure

Author

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  • Yu Zhang
  • Yan Gong

Abstract

Pressure to meet or beat earnings forecasts from securities analysts leads managers of publicly traded firms to improve short‐term earnings by cutting strategic investments at the expense of long‐term competitiveness. Drawing on the behavioral theory of the firm, we explore how different dimensions of performance feedback moderate managerial responses to this pressure. We find that the negative impact of earnings pressure on a firm’s strategic investments is strengthened when it receives performance feedback from lower stock returns but is weakened when the firm receives performance feedback from lower sales growth. When both dimensions of performance feedback are present, we find that sales growth has a stronger moderating effect. Our paper contributes to the developing literature on multiple dimensions of performance feedback by demonstrating how stock price and sales growth differentially influence managerial responses to earnings pressure. From a management standpoint, we highlight the possibility that performance feedback influences managerial responses to earnings pressures in ways that managers may not fully consider.

Suggested Citation

  • Yu Zhang & Yan Gong, 2018. "Stock Return or Sales Growth? Multiple Performance Feedback and Strategic Investments Under Securities Analysts’ Earnings Pressure," Journal of Management Studies, Wiley Blackwell, vol. 55(8), pages 1356-1385, December.
    • Handle: RePEc:bla:jomstd:v:55:y:2018:i:8:p:1356-1385
    DOI: 10.1111/joms.12392
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    Cited by:

    1. Liuyang Ren & Xi Zhong & Liangyong Wan, 2022. "Missing Analyst Forecasts and Corporate Fraud: Evidence from China," Journal of Business Ethics, Springer, vol. 181(1), pages 171-194, November.
    2. Xi Zhong & Liuyang Ren & Ge Ren, 2023. "Performance shortfall, institutional logic and firms’ tax avoidance," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(4), pages 855-886, December.
    3. Su, Taoyong & Yu, Yuzhu & Chen, Yongheng & Hou, Wanrong, 2023. "On or off: The triggering effect of underperformance duration on cooperative innovation," Technovation, Elsevier, vol. 126(C).
    4. Ben, Fang & Li, Zhe & Sun, Jing & Wang, Hongmei & Zhao, Xin, 2024. "Ecological product value accounting and analyst behavior," International Review of Financial Analysis, Elsevier, vol. 94(C).
    5. Veda Fatmy & Venla Haavisto & Janne Äijö, 2026. "Corporate Social Responsibility and Financial Performance in Europe: The Moderating Effects of Industry, Culture, and Governance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 33(2), pages 2817-2836, March.
    6. Lakshmi Goyal, 2023. "Investments during institutional transitions: Driven by problems or opportunities?," Asia Pacific Journal of Management, Springer, vol. 40(4), pages 1733-1768, December.
    7. Hendriks, Guus & Slangen, Arjen H.L. & Heugens, Pursey P.M.A.R., 2024. "Country portfolio diversity and firms’ portfolio adjustment decisions: A behavioral perspective," International Business Review, Elsevier, vol. 33(4).
    8. Hyonok Kim & Jungwon Min & Konari Uchida, 2026. "Performance target setting for organizational impression management: overestimated earnings targets after previous target misses," Review of Managerial Science, Springer, vol. 20(5), pages 1427-1458, May.
    9. Cheng, Cong & Chen, Linyi, 2025. "Profitability and CSR: Inconsistent performance feedback and OFDI location choices for firms in emerging countries," Journal of International Management, Elsevier, vol. 31(6).
    10. Xie, En & Fang, Alex Junyi & Chen, Xin & Wu, Zhan & Kumar, Vikas, 2022. "Performance feedback on sales growth goal and OFDI location choices for firms in emerging economies," Journal of World Business, Elsevier, vol. 57(4).
    11. Guo, Jianquan & Cheng, He, 2024. "Performance feedback on sales growth and M&A: Evidence from China," Japan and the World Economy, Elsevier, vol. 69(C).
    12. Moritz Hagen & Wenjia Su & Sebastian Junge, 2024. "60th birthday of ‘A Behavioral Theory of the Firm’: a review of the relational concepts and recommendations for future research," Management Review Quarterly, Springer, vol. 74(4), pages 2637-2682, December.
    13. Yang, Yiye & Li, Xiaohong & Zhang, Qihao & Zhang, Pengdong, 2025. "The externalities of managerial myopia: Aspiration performance gap and film quality in China," International Review of Financial Analysis, Elsevier, vol. 106(C).
    14. Yu, Yiyong & Cheng, Li & Zhang, Danni, 2024. "How does market competition affect enterprise cooperative innovation? The moderating role of intellectual property protection and government subsidies," Technovation, Elsevier, vol. 137(C).
    15. Kong, Pengzhi & Cheng, Louis T.W. & Pan, Lulu & Shen, Jianfu & Yu, Qing, 2025. "Non-financial information uncertainty, firm growth, and market value during crisis: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 91(C).
    16. Lili Ding & Zhongchao Zhao & Lei Wang, 2020. "Executive Incentives Matter for Corporate Social Responsibility under Earnings Pressure and Institutional Investors Supervision," Sustainability, MDPI, vol. 12(6), pages 1-22, March.
    17. Shiyi Tang & Yu Zhao & Qian Zheng & Yuxin Zhao & Ao Zan, 2026. "Symbolic Green Innovation When Expectations Are Failed: The Moderating Effect of Multidimensional TMT Human Capital," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 33(1), pages 1109-1128, January.
    18. Gao, Renfei & Zhang, Cyndi Man & He, Xiaogang & Li, Zhengyu, 2025. "Attention to market expansion: Aspirational antecedent and risk-taking consequence," Journal of Business Research, Elsevier, vol. 192(C).
    19. Shan Li & Shiyi Tang & Yuxin Zhao & Liang Han & Wan Liu, 2024. "Curse or blessing? Impact of the scope and duration of negative attainment discrepancy on ESG practices," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(6), pages 5236-5259, November.
    20. Chengguang Li & Oded Shenkar & William E. Newburry & Yinuo Tang, 2021. "How Country Reputation Differentials Influence Market Reaction to International Acquisitions," Journal of Management Studies, Wiley Blackwell, vol. 58(6), pages 1609-1639, September.
    21. Qian Sai & Yanxi Li & Yanwen Liu & Heng Zhao & Shanshan Ouyang, 2024. "Audit report information improvement and earnings management," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 425-442, January.

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