Persistence and current determinants of the future earnings growth rates of firms

摘要

Consistent with economic intuition, short- and long-term growth rates of both accrual earnings (AE) and cash flows (CF) exhibit mean-reversion at the firm level that is stronger when their base-year counterpart is negative. Firm attributes such as size, firm's age, earnings volatility, and past returns exhibit predictive power for growth rates for individual firms. Short- and long-term IBES earnings growth rate forecasts, when orthogonalized with respect to contemporaneous and past actual earnings growth rates, exhibit predictive power for, respectively, short- and long-term AE (but not CF) growth rates for both positive and negative base-year growth rates.