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Changes in Operating Margins during ...

Park, Han-Up.

Changes in Operating Margins during a Sales Decline and Abnormal Returns.

Record Type:	Electronic resources : Monograph/item
Title/Author:	Changes in Operating Margins during a Sales Decline and Abnormal Returns.
Author:	Park, Han-Up.
Published:	Ann Arbor : ProQuest Dissertations & Theses, 2017
Description:	96 p.
Notes:	Source: Dissertation Abstracts International, Volume: 79-01(E), Section: A.
Notes:	Adviser: Rajiv Banker.
Contained By:	Dissertation Abstracts International79-01A(E).
Subject:	Accounting.
Online resource:	http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=10599713
ISBN:	9780355171655

Changes in Operating Margins during a Sales Decline and Abnormal Returns.
Park, Han-Up.

Changes in Operating Margins during a Sales Decline and Abnormal Returns. - Ann Arbor : ProQuest Dissertations & Theses, 2017 - 96 p.

Source: Dissertation Abstracts International, Volume: 79-01(E), Section: A.

Thesis (Ph.D.)--Temple University, 2017.

I examine the implications of changes in operating profit margins during a sales decline for future earnings and abnormal stock returns. When sales decrease, managers decide whether to cut slack resources. Managers who are optimistic about their future operations often retain slack resources in anticipation of resurging sales, thereby decreasing concurrent profitability. Conversely, managers who are pessimistic about their future operations typically reduce slack resources to gain efficiency, thereby increasing concurrent profitability. I find that analysts and investors persistently underestimate the future profitability of firms that exhibit a large decrease in current profitability. I also find that subsequent quarterly earnings announcements gradually reveal future profitability, resulting in concentrated positive abnormal returns in short pre-announcement windows for about a year after a sales decline. These results suggest that analysts and investors have difficulties evaluating managers' resource adjustment decisions when a large decrease in concurrent profitability can indicate managers' optimistic expectations.

ISBN: 9780355171655Subjects--Topical Terms:

200440
Accounting.

Changes in Operating Margins during a Sales Decline and Abnormal Returns.
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520 $a I examine the implications of changes in operating profit margins during a sales decline for future earnings and abnormal stock returns. When sales decrease, managers decide whether to cut slack resources. Managers who are optimistic about their future operations often retain slack resources in anticipation of resurging sales, thereby decreasing concurrent profitability. Conversely, managers who are pessimistic about their future operations typically reduce slack resources to gain efficiency, thereby increasing concurrent profitability. I find that analysts and investors persistently underestimate the future profitability of firms that exhibit a large decrease in current profitability. I also find that subsequent quarterly earnings announcements gradually reveal future profitability, resulting in concentrated positive abnormal returns in short pre-announcement windows for about a year after a sales decline. These results suggest that analysts and investors have difficulties evaluating managers' resource adjustment decisions when a large decrease in concurrent profitability can indicate managers' optimistic expectations.
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