Discussion of “Differential Market Reactions to Revenue and Expense Surprises”

Discussion of “Differential Market Reactions to Revenue and Expense Surprises” Ertimur et al. (2003, this issue) study the difference in the market;s reaction to revenue versus expense surprises. The discussion first reviews their main findings and assesses the paper's potential contributions. Alternative explanations are then considered for the base-line result that the market reacts more to revenue surprises than to expense surprises. The hypothesized reasons for revenue surprises to matter more are critiqued, as are the tests of the hypotheses, and potential extensions that would link these test to financial statement analysis are suggested. Finally, two aspects of the assessment of how the reaction to revenue and expense surprises differs across value and growth firms are discussed: The definitions of value and growth firms and the potential benefits of assessing why analyst revenue forecasts are (not) observed for many value (growth) firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Discussion of “Differential Market Reactions to Revenue and Expense Surprises”

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Kluwer Academic Publishers
Copyright © 2003 by Kluwer Academic Publishers
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
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