Meeting or Beating Analysts Forecasts: Empirical Evidence of Firms Characteristics, and Persistence Patterns

Abstract

Focusing on the MBE (meeting or beating analysts forecast) phenomenon,

this study primarily investigates the way market responds to a firms

repeated MBE and to its first failure to meet analysts forecast after a

long string of MBE. The paper also asks whether the markets reaction to

the MBE patterns has changed after the regulatory reform including the

Sarbanes-Oxley Act and investigates the properties of habitual MBE firms.

The results show the market rewards persistent MBE firms and that it

seems to efficiently interpret a systematic portion of earnings surprise for

habitual beaters. They also document that the post-SOX stock market

premium to MBE has not completely diminished and that MBE patterns are

strongly associated with firm characteristics.