Do Fundamentals Convey Ex Ante Information about Profit Warnings?

A1 Journal article (refereed)


Internal Authors/Editors


Publication Details

List of Authors: Jonas Spohr
Publication year: 2017
Journal: Nordic Journal of Business
Volume number: 66
Issue number: 2
Start page: 75
End page: 91
eISSN: 2342-9011


Abstract

There is a
long tradition of research using fundamentals to forecast the performance of
firms. More recently some studies have suggested that managers tend to delay
the disclosure of bad news. Combining these two facets, fundamentals should
have some success in forecasting upcoming profit warnings. A profit warning
usually triggers a big downward movement in the firm’s share price, so
predicting these disclosures beforehand would be of value. To answer the
research question, if fundamentals can be used to predict profit warnings,
accounting variables and share price movements are analyzed in a quarterly
setting around profit warnings. The findings show that firms’ profitability
tends to decrease and their accrual accounts to increase already in the quarter
before the profit warning is issued.


Last updated on 2019-15-09 at 05:44