Title: Positive and negative earnings and their interaction with stock returns: empirical evidence from the emerging market of Greece

Authors: Panagiotis E. Dimitropoulos, Dimitrios Asteriou

Addresses: Department of Sport Management, University of Peloponnese, 3-5 Lysandrou Str., Sparta, P.C.23100, Greece. ' School of Social Sciences, Hellenic Open University, Bouboulinas 57-59 Str., 26222, Patras, Greece; Department of Economics, City University, Northampton Square, EC1V 0HB, London, UK

Abstract: This study investigates the informational content of losses and their effect on the association between earnings and stock returns. Previous studies demonstrated that losses are less informative than positive earnings since they are not expected to prolong (Hayn, 1995). Our results prove that this hypothesis is existent in the Greek capital market. Additionally, the results indicate that the frequency of losses varies with firm size. Also, the estimated Earnings Response Coefficients (ERC) increases as the measurement interval of earnings and returns expands. Finally, the tests for the effect of mean reversion in earnings, as the cause for the low informativeness of losses, did not verify our initial hypothesis. Our results are consistent to earlier studies in the USA, Finland, Australia and the Baltic region.

Keywords: losses; liquidation option; earnings response coefficients; ERC; accounting earnings; financial markets; Greece; positive earnings; negative earnings; stock returns; emerging markets; capital markets; firm size.

DOI: 10.1504/IJAF.2009.029144

International Journal of Accounting and Finance, 2009 Vol.1 No.4, pp.357 - 374

Published online: 06 Nov 2009 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article