6533b7d4fe1ef96bd126345e

RESEARCH PRODUCT

The value relevance of losses revisited: the importance of earnings aggregation

Leif Atle Beisland

subject

Earnings response coefficientEconomics and EconometricsEarningsEarnings per shareeducationFinancial systemPost-earnings-announcement driftvalue relevance earnings cash flow accruals lossPrice–earnings ratioEconomicsEconometricsVDP::Social science: 200::Economics: 210::Economics: 212Cash flowBusiness and International ManagementExplanatory powerhealth care economics and organizationsStock (geology)

description

Accepted version of an article published in the journal: Global Business and Economics Review. Also available from the publisher at: http://dx.doi.org/10.1504/GBER.2011.040728 Prior research has suggested that earnings explain a larger portion of the variation in stock returns when disaggregated into components. This study shows that the increase in explanatory power stems primarily from disaggregation of negative earnings. When accounting earnings are sufficiently disaggregated into items, there is no longer a statistical difference in the value relevance of positive and negative earnings. Thus, negative earnings are also useful to stock investors. The findings are attributed to earnings persistence; even if losses are not persistent on an aggregate level, it may be the case that individual earnings items can provide information with respect to the future cash flow-generating capabilities of the firm.

yearjournalcountryeditionlanguage
2011-01-01Global Business and Economics Review
https://doi.org/10.1504/gber.2011.040728