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The impact of strategic interaction on earnings expectations associated with corporate product strategies

Sheng-Syan Chen, Po-Jung Chen and Wen-Chun Lin

Journal of Banking & Finance, 2012, vol. 36, issue 1, 66-77

Abstract: We examine how strategic interaction in an industry influences the earnings expectations of financial analysts with regard to new product strategies. We find that following announcement of new products, analysts revise earnings forecasts upward more for announcing firms competing in low-strategic interaction industries than for firms competing in high-strategic interaction industries. For value-enhancing (value-reducing) product strategies, earnings forecast revisions are more favorable for rivals competing under a high (low) degree of strategic interaction than for rivals competing under a low (high) degree of strategic interaction. Overall empirical evidence indicates that the nature of strategic competition within the industry is important in assessing the market expectations of earnings for new product announcers and their rivals.

Keywords: Strategic interaction; Financial analyst; Forecast revision; New product strategy (search for similar items in EconPapers)
JEL-codes: G24 G31 L22 (search for similar items in EconPapers)
Date: 2012
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Handle: RePEc:eee:jbfina:v:36:y:2012:i:1:p:66-77