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Persistence and current determinants of the future earnings growth rates of firms

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  • Lawrence Kryzanowski
  • Sana Mohsni

Abstract

Consistent with economic intuition, short- and long-term growth rates of both accrual earnings (AE) and cash flows (CF) exhibit mean-reversion at the firm level that is stronger when their base-year counterpart is negative. Firm attributes such as size, firm's age, earnings volatility, and past returns exhibit predictive power for growth rates for individual firms. Short- and long-term IBES earnings growth rate forecasts, when orthogonalized with respect to contemporaneous and past actual earnings growth rates, exhibit predictive power for, respectively, short- and long-term AE (but not CF) growth rates for both positive and negative base-year growth rates.

Suggested Citation

  • Lawrence Kryzanowski & Sana Mohsni, 2014. "Persistence and current determinants of the future earnings growth rates of firms," The European Journal of Finance, Taylor & Francis Journals, vol. 20(2), pages 181-200, February.
    • Handle: RePEc:taf:eurjfi:v:20:y:2014:i:2:p:181-200
    DOI: 10.1080/1351847X.2013.769891
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    Cited by:

    1. Kryzanowski, Lawrence & Mohsni, Sana, 2015. "Earnings forecasts and idiosyncratic volatilities," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 107-123.

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