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Das, S and Zhang, H (2001)

The stock marketís under-reaction to rounding-up in EPS

Preprint.

ISSN/ISBN: Not available at this time. DOI: Not available at this time.



Abstract: ABSTRACT: Reported earnings per share (EPS) are frequently rounded to the nearest cent. The business press and recent academic research provide evidence that firms manipulate earnings so that they can round-up and report one more cent of EPS. This paper examines the stock marketís reaction to rounding-up. We find that investors differentiate in their response towards roundingup firms and non-rounding-up firms at the time of earnings announcements. However, we find that investorsí reaction is not complete. The hedge portfolio with a long position in nonrounding- up firms and a short position in rounding-up firms generates statistically significant positive abnormal returns in the subsequent quarter


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Reference Type: Preprint

Subject Area(s): Economics