Accounting Department, Faculty of Administrative Sciences and Economics, University of Isfahan, Iran
10.22099/jaa.2021.40327.2124
Abstract
Prior literature shows that firm’s earnings tends to move with other firms in same industry. This concept is called co-movement. So investors will be able to form an expectation of a firm’s earnings from the industry. Given that the reported earnings do reflect the flow of information to the market, the purpose of this study is investigating the effect of earnings co-movement on quarterly earnings response coefficient. The sample of this study consists of 134 listed companies in Tehran Stock Exchange during 2008 to 2019. The results of the first hypothesis showed that the response coefficients to quarterly earnings announcement have a positive and significant relationship with the buy and hold returns in the three-day earnings announcement window, and earnings co-movement weakens this relationship. Also, the results of testing the second and third hypotheses showed that when there is good news, earnings co-movement weakens earnings response coefficient, but under bad news, earnings co-movement has no effect on earnings response coefficient.
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