Article1997

Finnish earnings response coefficients: the information content of losses

Teppo Martikainen · Juha‐Pekka Kallunki · Jukka Perttunen

28 citations0/0 files storedEuropean Accounting Review

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Auditing, Earnings Management, Governance Financial Markets and Investment Strategies Financial Analysis and Corporate Governance

Abstract

This paper provides new evidence on the information content of losses in the relation between stock returns and annual accounting earnings. Consistent with earlier US evidence, accounting losses are not significantly related to stock returns in Finland. Moreover, it is shown that the different methods used to measure earnings in Finland affect the frequency of losses, substantially altering the estimated return-earnings relation. The results suggest that earnings adjusted in accordance with the recommendations of the Finnish Committee for Corporate Analysis are not more useful than the unadjusted reported earnings in explaining stock returns in Finland.

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References

1968An Empirical Evaluation of Accounting Income Numbers 1995The information content of losses 1989On the Usefulness of Earnings and Earnings Research: Lessons and Directions from Two Decades of Empirical Research 1991Earnings Asan Explanatory Variable for Returns 1993The Relative Informativeness of Accounting Disclosures in Different Countries 1992Aggregate accounting earnings can explain most of security returns 1982Book Rate-of-Return and Prediction of Earnings Changes: An Empirical Investigation 1990The incremental information content of cash-flow components

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