The Effect of Earning Consistent Growth on the Stock Price Reactions to the EPS Forecast Characteristic

Subject Areas : Journal of Investment Knowledge

Fereshteh Basiri ¹ (Master of accounting, Islamic Azad University Arak Branch, Department of accounting, Arak, Iran)
Mohammad Hamed Khan Mohammadi ² (Assistant Professor, Islamic Azad University Damavand Branch, Department of accounting, Damavand, Iran)

Received: 2012-12-25 Accepted : 2013-03-10 Published : 2013-03-10

Keywords: Earning consistent growth, abnormal return, EPS forecast characteristics,

Abstract :

Firms with a history of growth in earning have been able to get good rankings in the capital market and Concerned about maintaining their reputation. The concern is whether earning forecast increase firm`s credibility or reduce it? This study illustrates the effect of earnings consistent growth on the stock price reaction to the EPS forecast characteristics. In this study we use 104 firms' data during 1383 to 1389. Capital market reaction to bad news earning forecasts and Earning Forecast Horizon in earnings consistent growth companies differ from others while Capital market reaction to good news earning forecasts and Earning Forecast point was not affected by earning consistent growth. It seems that it is related to investors' attitudes about the importance and credit of bad news earning forecast.