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Sustained Earnings and Revenue Growth, Earnings Quality, and Earnings Response Coefficients

Author

Listed:
  • Aloke Ghosh

    (The Securities and Exchange Commission, the City University of New York)

  • Zhaoyang Gu

    (Carnegie Mellon University)

  • Prem C. Jain

    (Georgetown University)

Abstract

We show that firms reporting sustained increases in both earnings and revenues have (1) higher quality earnings and (2) larger earnings response coefficients (ERCs) in comparison to firms reporting sustained increases in earnings alone. With respect to earnings quality, firms with revenue-supported increases in earnings have more persistent earnings, exhibit less susceptibility to earnings management, and have higher future operating performance. With respect to response coefficients, firms with revenue-supported increases in earnings have both higher ERCs and lower book value response coefficients, consistent with the implications of the Ohlson (1995, Contemporary Accounting Research 12, 661–687) model.

Suggested Citation

  • Aloke Ghosh & Zhaoyang Gu & Prem C. Jain, 2005. "Sustained Earnings and Revenue Growth, Earnings Quality, and Earnings Response Coefficients," Review of Accounting Studies, Springer, vol. 10(1), pages 33-57, March.
    • Handle: RePEc:spr:reaccs:v:10:y:2005:i:1:d:10.1007_s11142-004-6339-3
    DOI: 10.1007/s11142-004-6339-3
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    Cited by:

    1. Costache-Dragodan Cristiana Adriana & Lepădatu Roxana Elena & Istudor Mihai & Toderasc Ștefan Alin, 2025. "Determinants of ESG Score in the Energy Sector," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 19(1), pages 5098-5117.

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