Explaining firms’ earnings announcement stock returns using FactSet and I/B/E/S data feeds

John R. M. Hand (), Henry Laurion (), Alastair Lawrence () and Nicholas Martin ()
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John R. M. Hand: UNC–Chapel Hill
Henry Laurion: University of Colorado Boulder
Alastair Lawrence: London Business School
Nicholas Martin: UNC–Chapel Hill

Review of Accounting Studies, 2022, vol. 27, issue 4, No 8, 1389-1420

Abstract: Abstract Since 2001, the number of financial statement line items forecasted by analysts and managers that I/B/E/S and FactSet capture in their data feeds has soared. Using this new data, we find that 13 item surprises—11 income statement-based and 2 cash flow statement-based analyst and management guidance surprises—reliably explain firms’ signed earnings announcement returns. No balance sheet or expense surprises are significant. The most important surprises are (i) one-quarter-ahead sales guidance surprise, (ii) analyst sales surprise, (iii) annual Street earnings guidance surprise, and (iv) analyst Street earnings surprise. We also find that the adjusted R2s of our multivariate regressions are three times higher than the adjusted R2s of univariate Street earnings surprise regressions, and that the four most important surprises account for approximately half of this increase in explanatory power.

Keywords: Earnings announcement returns; Analyst forecast surprises; Management guidance surprises; FactSet; I/B/E/S; G12; G17; M41 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11142-021-09597-6

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