Preprint.
ISSN/ISBN: Not available at this time. DOI: Not available at this time.
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 market’s 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 investors’ 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.
Bibtex:
@misc{,
AUTHOR = {Somnath Das and Huai Zhang},
TITLE = {The stock market’s under-reaction to rounding-up in EPS},
YEAR = {2001},
URL = {http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.533.2008&rep=rep1&type=pdf},
}
Reference Type: Preprint
Subject Area(s): Economics