Changes In Earnings Research Articles

Aggregate tone and gross domestic product

AbstractWe examine whether the change in earnings announcement textual tone, aggregated across individual publicly traded firms, helps predict gross domestic product (GDP) growth. The literature finds that changes in aggregate accounting earnings do help predict GDP growth, but only when aggregate earnings changes are negative. Because conservative accounting rules limit managers' ability to communicate positive news promptly, we examine the tone of quarterly corporate earnings announcements as a possible source of timely positive information provided by firms. We find that the change in aggregate tone in the earnings announcements from the same quarter in the previous year predicts one‐quarter‐ahead GDP growth, but only when the change is positive. Our study contributes to the literature by investigating the relation between aggregate corporate disclosure tone and macroeconomic outcomes.

The role of oil revenue in shaping Iraq's public budget

The objective of this paper was to give a wide overview of the background of Iraq’s economy during last five decades. From the previous studies, it is evident that oil export has made a significant contribution to the Iraqi economy. This contribution, as we have analyzed took the form of periodic injections of purchasing power into the domestic economy. However, changes in the country's earnings were mostly influenced by crude oil revenues, reflecting global prices of oil and daily level of oil production. Then the fluctuating oil price and production levels disturb this injection and also disturb whole Iraqi economy. Due to changing oil revenue, the structure of Iraqi economy significantly changed from tradable goods sectors to non-tradable goods sector. Apart from that the contribution of oil sector to GDP has significantly increase and government expenditure also increased sharply. The outcomes is shown in data via tables and figures throughout the period of 1970-2013.

Impact of incident rheumatoid arthritis on earnings: a nationwide sibling comparison study.

RA is known to impact work ability but much of this knowledge comes from historical comparisons vs the general population that neither reflects current RA management, nor distinguishes between effects of RA and pre-existing socio-economic conditions of patients. We therefore aimed to examine earnings of patients before and after RA diagnosis, using recent data and sibling comparisons. Swedish register data were used including demographic information and healthcare utilization. Participants were patients with RA (aged 30-60 years, diagnosed with RA 2006-2017) identified in the Swedish National Patient Register, and their same-sex siblings (n = 2433:2433; mean 48 y; 72% women). Earnings data for 2001-2019 were retrieved from Statistics Sweden and analysed from 5 years before to 5 years after RA diagnosis. No differences in average earnings were observed between siblings during the 5 years before diagnosis, but during the 5 years after diagnosis, patients with RA earned on average 5.4% less annually (-1430€[95%CI -2130, -720]) than same-sexed siblings. The change in earnings for the subgroup diagnosed 2006-2010 was -8.2% (-2020€[95%CI -2930, -1120]) but for patients diagnosed 2011-2017 there was no statistically significant change in earnings compared with siblings (-1.5%; -420€[95%CI -1490, 640]). Subgroup analyses demonstrated a more negative impact on earnings for older individuals and those with lower education level. RA diagnosis was associated with lower earnings in comparison with same-sex siblings, particularly for older individuals and those with lower education level. The negative impact of RA on earnings declined or disappeared over the study period.

Dividend signalling and investor protection: An international comparison

This study examines whether dividend changes signal future earnings growth in non-US markets following the Ham et al. (2020) methodology and whether the strength of the earnings signal varies with the level of investor protection. Based on the notion that weak investor protection reduces the cost of cutting dividends and as such increases managers’ discretion to change dividends, we expect that the strength of the earnings signal in dividend increases becomes weaker as investor protection decreases. In a sample drawn from 38 different markets, our results indicate while dividends can signal future earnings in non-US markets, the strength of the signal is weaker than that in the US. In line with our predictions, we find that for firms in a strong investor protection environment, dividend changes are correlated more strongly with subsequent earning changes than is the case for firms in weak investor protection environments.

The declining affordability of dental care in New Zealand from 1978 to 2023.

In the early 2020s, nearly half of New Zealand adults reported that cost of treatment had prevented them from accessing dental care, with higher rates among Māori, Pasifika and individuals living in the most deprived areas. Unaffordable dental care may be explained by a rise in dental service fees over time relative to personal income, as documented in New Zealand between 1978 and 1993. However, there have been no contemporary estimates in New Zealand of how the affordability of dental care has changed. The aims of this study were to analyse the change in dental treatment fees and the personal income of New Zealanders from 1978 to 2023 and to explore differences in affordability of dental care by ethnicity. Average fees for dental treatments were sourced from surveys completed by practising New Zealand dentists. Earnings (from 1978) and personal income data (full population from 2000 and by ethnicity from 2008) were sourced from Statistics NZ and NZ Official Yearbooks. Inflation-adjusted changes in average fees, weekly personal earnings and income were calculated as a percentage change from 1978 levels for fees and earnings and from 2000 for personal income. For the five dental treatments with data available from 1978 to 2023, fees increased in the range of 75%-236%, while earnings increased by 46% over the same period. Fees for other treatments (with data available from 1981 to 2009) similarly increased and mostly surpassed changes in earnings. From 2008 to 2023 the overall increase in personal income (about 21% across all ethnic groups) kept pace with the rising cost of most treatments. However, due to persistent income inequalities, in 2023, Māori and Pasifika would need to spend a higher proportion of their weekly income (approximately 16% and 23% respectively) to receive the same dental treatments as NZ Europeans. Fees for dental treatments have risen markedly in recent decades, more sharply than the price of other goods and services.

Consumption dynamics and welfare under non-Gaussian earnings risk

Recent empirical studies document that the distribution of earnings changes displays substantial deviations from lognormality: in particular, earnings changes are negatively skewed with extremely high kurtosis (long and thick tails), and these non-Gaussian features vary substantially both over the life cycle and with the earnings level of individuals. Furthermore, earnings changes display nonlinear (asymmetric) mean reversion. In this paper, we embed a very rich “benchmark earnings process” that captures these non-Gaussian and nonlinear features into a lifecycle consumption-saving model and study its implications for consumption dynamics, consumption insurance, and welfare. We show four main results. First, the benchmark process essentially matches the empirical lifetime earnings inequality—a first-order proxy for consumption inequality—whereas the canonical Gaussian (persistent-plus-transitory) process understates it by a factor of five to ten. Second, the welfare cost of idiosyncratic risk implied by the benchmark process is between two-to-four times higher than the canonical Gaussian one. Third, the standard method in the literature for measuring the pass-through of income shocks to consumption—can significantly overstate the degree of consumption smoothing possible under non-Gaussian shocks. Fourth, the marginal propensity to consume out of transitory income (e.g., from a stimulus check) is higher under non-Gaussian earnings risk.

Observational learning and firm dynamics

AbstractThis article investigates the implications of observational learning for firm dynamics. Because consumers learn through past purchase decisions, monopolistic firms can induce information cascades through prices. We characterize when cascades arise and argue that the fragile nature of cascades is reflected in firm‐level data. We measure fragility using reversals: periods when a firm with historically stable revenues experiences a large, sudden change in earnings. We document a robust pattern that the frequency of reversals among stable firms declines with age, and show a calibration exercise delivers an untargeted age profile in line with the data. Finally, efficiency is discussed.

Structural Labour Market Change and Gender Inequality in Earnings

Research from the US argues that women will benefit from a structural labour market change as the importance of social tasks increases and that of manual tasks declines. This article contributes to this discussion in three ways: (a) by extending the standard framework of task content of occupations in order to account for the gender perspective; (b) by developing measures of occupational task content tailored to the European context; and (c) by testing this argument in 13 European countries. Data are analysed from the European Skills, Competences, Qualifications and Occupations database and the European Structure of Earnings Survey. The analysis demonstrates that relative to men the structural labour market change improves the earnings potential of women working in low- and middle-skilled occupations but not those in high-skilled occupations. Women are overrepresented in low-paid social tasks (e.g. care) and are paid less for analytical tasks than men.

Pengaruh Rasio Likuiditas, Rasio Solvabilitas, Rasio Profitabilitas, dan Rasio Aktivitas Terhadap Perubahan Laba Pada Industri Farmasi

This study aims to examine how influential the Liquidity Ratio, Solvency Ratio, Liquidity Ratio and Profitability Ratio have on Profit Changes in the Pharmaceutical Industry Listed on the Indonesian Stock Exchange in 2016-2020. This type of research is quantitative by taking data on company financial reports that have been published on the Indonesia Stock Exchange. The theory used in this research is Signaling Theory. The sampling method used purposive sampling technique. The samples used in this study were 10 pharmaceutical companies listed on the Indonesia Stock Exchange. With a total of 50 data with a period of 5 years. The analytical method used is multiple linear analysis supported by IBM SPSS Statistics version 25. The results of this study indicate that the Activity Ratio variable has an effect on earnings changes. However, the Profitability Ratio has a negative effect on Profit Changes, while the Liquidity Ratio and Solvability Ratio have no effect on Profit Changes at all.

A Structural Break in the Aggregate Earnings–Returns Relation

Abstract This study empirically estimates the date of the structural change in the aggregate earnings–returns relation and reports it as the fourth quarter of 1991. We identify three sources of the structural change: (i) an increase in the relative importance of cash flow news contained in stock returns; (ii) a decrease in the importance of discount rate news contained in aggregate earnings; and (iii) a decrease in the persistence or the predictability of aggregate earnings and returns. Next, we examine the components of aggregate earnings and find that the change in the aggregate earnings–returns relation is largely driven by intertemporal changes in aggregate inventory accruals, suggesting the structural change is attributable to improved inventory management systems.

Traumatic Cervical Spinal Cord Injury and Income and Employment Status

Spinal cord injury (SCI) causes drastic changes to an individual's physical health that may be associated with the ability to work. To estimate the association of SCI with individual earnings and employment status using national administrative health databases linked to income tax data. This was a retrospective, national, population-based cohort study of adults who were hospitalized with cervical SCI in Canada between January 2005 and December 2017. All acute care hospitalizations for SCI of adults ages 18 to 64 years were included. A comparison group was constructed by sampling from individuals in the injured cohort. Fiscal information from their preinjury years was used for comparison. The injured cohort was matched with the comparison group based on age, sex, marital status, province of residence, self-employment status, earnings, and employment status in the year prior to injury. Data were analyzed from August 2022 to January 2023. The first outcome was the change in individual annual earnings up to 5 years after injury. The change in mean yearly earnings was assessed using a linear mixed-effects differences-in-differences regression. Income values are reported in 2022 Canadian dollars (CAD $1.00 = US $0.73). The second outcome was the change in employment status up to 5 years after injury. A multivariable probit regression model was used to compare proportions of individuals employed among those who had experienced SCI and the paired comparison group of participants. A total of 1630 patients with SCI (mean [SD] age, 47 [13] years; 1304 male [80.0%]) were matched to patients in a preinjury comparison group (resampled from the same 1630 patients in the SCI group). The mean (SD) of preinjury wage earnings was CAD $46 000 ($48 252). The annual decline in individual earnings was CAD $20 275 (95% CI, -$24 455 to -$16 095) in the first year after injury and CAD $20 348 (95% CI, -$24 710 to -$15 985) in the fifth year after injury. At 5 years after injury, 52% of individuals who had an injury were working compared with 79% individuals in the preinjury comparison group. SCI survivors had a decrease in employment of 17.1 percentage points (95% CI, 14.5 to 19.7 percentage points) in the first year after injury and 17.8 percentage points (14.5 to 21.1 percentage points) in the fifth year after injury. In this study, SCI was associated with a decline in earnings and employment up to 5 years after injury for adults aged 18 to 64 years in Canada.

Understanding the variance of earnings growth: The case of shipping

This study examines the relationship between the unexpected changes in earnings and the shipping market movements. The econometric method of variance decomposition proposed by Campbell (1991) is employed to empirically analyze the Panamax and Capesize markets. We find that a large proportion of unexpected earnings growth is related to news about returns that indicate subsequent price changes. The results provide important insights to practice for sustaining shipping businesses, which helps shipping companies make better investment and risk-management decisions. The contribution of this research is to deepen the understanding of the interaction between shocks to earnings growth, returns, and price–charter ratios in the present-value context.

Public opinion, racial bias and labour market outcomes in the USA.

Here we study the role of negative shifts in public opinion in the economic lives of under-represented racial groups by investigating sudden changes in views towards Asian people following the anti-Chinese rhetoric that emerged with the COVID-19 pandemic, and associated changes in employment status and earnings in the US labour market. Using data from the Current Population Survey, we find that, unlike other under-represented groups, Asian workers in occupations or industries with a higher likelihood of face-to-face interactions before the pandemic were more likely to become unemployed afterwards. While widespread along the political spectrum, negative shifts in the perceived favourability of Asian people, and not of other under-represented groups, were much stronger among those who voted for Donald Trump in 2016 and could have been more influenced by the anti-Asian rhetoric.

Information Discovery by Analysts

We provide direct evidence that analysts engage in information discovery, and that investors value this discovery. The innovation in our article is to read through the summaries of over 3,500 analyst reports to identify whether analysts engage in discovery and/or interpretation. Analysts discover new information from management sources (example: personal meetings) and non-management sources (example: channel checks). Information discovery is prevalent in 17% of the reports. Investors react more strongly to analyst reports containing changes in price targets or Earnings per Share if those reports are accompanied by information discovery. Economic determinants predict whether a report contains discovery.

Dynamic Incentives in Retirement Earnings-Replacement Benefits

Abstract We analyze dynamic incentives in pension systems created by the use of a small set of final years of earnings to compute benefits. Using social security records and household surveys from Uruguay, we show that self-employed workers and some employees of small firms respond to these incentives by increasing reported earnings in the benefit calculation window. We find evidence that suggests that these responses are explained by changes in earnings reporting and not in total earnings or labor supply. Back-of-the-envelope calculations indicate that this behavior increases the cost of pensions by about 0.2% of the GDP.

Intangible Assets and Analysts’ Overreaction and Underreaction to Earnings Information: Empirical Evidence from Saudi Arabia

Several prior studies indicate that financial analysts exhibit systematic underreaction to information; others illustrate systematic overreaction. We assume that cognitive biases influence analysts’ behavior and that these misreactions are not systematic, but they depend on the nature of news. As cognitive biases intensify in situations of high ambiguity, we distinguish between bad and good news and investigate the impact of intangible assets—synonymous with high uncertainty and risk—on financial analysts’ reactions. We explore the effect of information conveyed by prior-year earnings announcements on the current-year forecast error. Our findings in the Saudi financial market reveal a tendency for overreaction to positive prior-year earnings change (good performance) and positive prior-year forecast errors (good surprise). Conversely, there is an underreaction to the negative prior-year earnings change (bad performance) and negative prior-year forecast error (bad surprise). Notably, analysts exhibit systematic optimism rather than systematic underreaction or overreaction. The results also highlight that the simultaneous phenomena of overreaction and underreaction is more pronounced in high intangible asset firms compared to low intangible asset firms.

잠정이익공시의 유용성에 관한 연구

[Purpose] This study investigates the propensity of managers to adjust discretionary accruals in response to sign changes in preliminary earnings at the provisional settlement stage. The research specifically aims to explore whether these sign changes serve as incentives for managers to manipulate accounting figures.
 [Methodology] The study utilizes an empirical approach, focusing on 5,945 KOSPI and KOSDAQ listed companies that disclosed their preliminary earnings from 2013 to 2019. It examines the impact of sign changes in preliminary earnings on discretionary accruals and further investigates whether companies that over－report their preliminary earnings with a sign change exhibit larger increases in discretionary accruals.
 [Findings] The findings indicate that discretionary accruals increase when preliminary earnings turn negative and decrease when they turn positive. This suggests that managers are likely to adjust earnings when an anticipated accounting profit sign change may result in a loss. Moreover, regardless of the direction of the sign change, an over－reporting of preliminary earnings is associated with a significant increase in discretionary accruals.
 [Implications] While preliminary earnings announcements enhance timeliness and usefulness, there is a risk of reduced reliability due to managerial optimistic bias. Understanding the reliability of these announcements in advance can provide more relevant information to external users. Despite the challenge in discerning optimistic decision－making at the provisional settlement stage, this study demonstrates the significant relationship between sign changes in preliminary earnings and discretionary accruals, thus contributing valuable insights to the field of accounting.

Does More Education Always Mean Higher Earnings? Evidence from Bangladesh

Essentially championed by the human capital theory, it is a widely accepted notion that the higher an individuals’ education level, the more likely they are to earn. However, is this true in the case of different groups of individuals across the type of education pursued, gender, and whether an individual grew up in a rural or urban area? This paper explores this question and tests whether there is a significant increase in earnings for every additional education level in the case of six particular groups of individuals: Individuals who studied in the general education stream, individuals who studied in the religious education stream, males, females, those who grew up in urban areas and those who grew up in rural areas. Using nationally representative data and ordinary least-squares estimation, this paper finds that individuals who studied in the religious stream and, in some cases, females, do not necessarily experience increased labor market earnings with an increase in their education level. Speculating on possible reasons behind these findings, I argue for criticalities and nuances to be better considered when assessing the change in earnings across education in a particular context.

Predicting Future Earnings Changes: a Modest Integration of Artificial Neural Networks and Financial Factors

Predicting Future Earnings Changes: a Modest Integration of Artificial Neural Networks and Financial Factors

The Value Relevance of Sustainability Disclosure Quality

In the contemporary landscape, ESG (environmental, social, and governance) performance has emerged as a pivotal concern for capital market investors. Despite its prominence, the ongoing debate in the literature regarding the value relevance of ESG underscores the need for empirical insights. This study addresses this gap by investigating the moderating role of ESG disclosure quality in shaping the relationship between earnings, annual changes in earnings, and stock returns. Drawing on a dataset comprising 254 firm-year ESG reports in Indonesia from 2017 to 2022 and employing panel data regression, the research unveils compelling results. It demonstrates that high-quality ESG disclosure not only reinforces the impact of earnings and annual changes in earnings on stock returns but also signifies a lower risk of future sustainability and long-term growth. These findings substantiate the idea that robust integration of sustainability principles in business practices contributes significantly to the creation of shareholder value. Importantly, this research carries profound implications for Indonesian companies, emphasizing the critical role of ESG disclosure in fostering sustainable business practices and enhancing shareholder value in the evolving landscape of capital markets.