Cost stickiness, earnings forecast accuracy, and the informativeness of stock prices about future earnings: evidence from China

Jia Li and Zhoutianyang Sun ()
Additional contact information
Jia Li: Ningbo University of Finance & Economics
Zhoutianyang Sun: Suzhou City University

Palgrave Communications, 2023, vol. 10, issue 1, 1-16

Abstract: Abstract This paper uses the data from the Chinese capital market to study the relationship between cost stickiness, earnings forecast accuracy and stock price information content. The empirical results show that: (1) Cost stickiness significantly affects the earnings response coefficient of stock prices. Lower cost stickiness improves the ability of current returns to reflect future earnings, which is manifested in higher future earnings response coefficient (FERC). (2) Cost stickiness significantly reduces the future earnings response coefficient of non-state-owned enterprises, but does not reduce the future earnings response coefficient of state-owned enterprises. It can be seen that investors have different attitudes towards cost stickiness of listed companies with different property rights in the process of investment decision-making. (3) Cost stickiness significantly increases stock prices synchronicity and decreases the number of company-specific information reflected in stock prices. Further analysis shows that cost stickiness increases earnings forecast accuracy, which is the partial intermediary mechanism for cost stickiness to improve FERC and reduce stock price synchronicity. This paper not only enriches the relevant literature of cost stickiness and earnings response coefficient, but also shows that cost stickiness is an important factor affecting the information efficiency of capital market.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1057/s41599-023-01592-3 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palcom:v:10:y:2023:i:1:d:10.1057_s41599-023-01592-3

Ordering information: This journal article can be ordered from
https://www.nature.com/palcomms/about

DOI: 10.1057/s41599-023-01592-3

Access Statistics for this article

More articles in Palgrave Communications from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().