This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Firms’ Relative Operational Efficiency and Analysts’ Earnings Forecasts

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Fatma Cebenoyan () (Department of Economics, Hunter College)
Donal Byard

Additional information is available for the following registered author(s):

Abstract

Relatively more efficient firms tend to maintain more stable levels of output and operating performance compared to their industry peers (Mills and Schumann 1985). Such firms also tend to have more sustainable performance (Berger et al. 1993). Given their more stable and sustainable levels of operating performance, we test the related prediction that financial analysts find the earnings of relatively more efficient firms to be more predictable. Using a stochastic frontier approach to measure firms’ relative operational efficiency, we find that analysts face less earnings uncertainty for relatively more efficient firms, compared to other firms in the same industry. We find that this broader more encompassing measure of firms’ relative operational efficiency yields stronger results than comparable accounting ratios (ROA and ROE). These results indicate that analysts behave as if they factor into their forecasts an understanding of the underlying economics of a business of an industry. Furthermore, the users of these forecasts can also benefit from this information in terms of assessing the level of reliability of forecasts.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://arrow.hunter.cuny.edu/research/papers/HunterEconWP302.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Hunter College: Department of Economics in its series Hunter College Department of Economics Working Papers with number 302.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2003
Date of revision:
Handle: RePEc:htr:hcecon:302

Contact details of provider:
Postal: 695 Park Avenue, New York, NY 10065
Phone: 212-772-5400
Fax: 212-772-5398
Web page: http://econ.hunter.cuny.edu
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Jonathan Conning).

Related research
Keywords: Relative Operational Efficiency; Return on Assets; Return on Equity; Analysts’ Earnings Forecasts; Earnings Uncertainty.;

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Allen N. Berger & Loretta J. Mester, 1997. "Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions?," Center for Financial Institutions Working Papers 97-04, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
    Other versions:
  2. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August. [Downloadable!] (restricted)
  3. Kwan, Simon H. & Eisenbeis, Robert A., 1995. "An analysis of inefficiencies in banking," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 733-734, June. [Downloadable!] (restricted)
  4. Allen, Linda & Rai, Anoop, 1996. "Operational efficiency in banking: An international comparison," Journal of Banking & Finance, Elsevier, vol. 20(4), pages 655-672, May. [Downloadable!] (restricted)
  5. Joseph P. Hughes & William W. Lang & Loretta J. Mester & Choon-Geol Moon & Michael S. Pagano, 2002. "Do bankers sacrifice value to build empires? managerial incentives, industry consolidation, and financial performance," Working Papers 02-2, Federal Reserve Bank of Philadelphia. [Downloadable!]
    Other versions:
  6. DeYoung, Robert, 1997. "A diagnostic test for the distribution-free efficiency estimator: An example using U.S. commercial bank data," European Journal of Operational Research, Elsevier, vol. 98(2), pages 243-249, April. [Downloadable!] (restricted)
  7. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July. [Downloadable!] (restricted)
  8. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July. [Downloadable!] (restricted)
  9. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-93, May. [Downloadable!] (restricted)
    Other versions:
  10. Dechow, Patricia M., 1994. "Accounting earnings and cash flows as measures of firm performance : The role of accounting accruals," Journal of Accounting and Economics, Elsevier, vol. 18(1), pages 3-42, July. [Downloadable!] (restricted)
  11. Jacobson, Robert, 1987. "The Validity of ROI as a Measure of Business Performance," American Economic Review, American Economic Association, vol. 77(3), pages 470-78, June. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? All full texts are decentralized with the publishers, none reside on this server, thus making it possible to offer this service for free to all parties.

This page was last updated on 2009-11-11.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.