ACCOUNTING EARNINGS AND FUTURE ECONOMIC RENTS - AN EMPIRICAL-ANALYSIS

This study reexamines competition, cost structure, and growth opportun ities effects on earnings response coefficients and extends this liter ature in several ways. First, it presents a more refined theoretical m otivation for investigating competition and cost structure effects. Se cond, it introduces new economic factor proxies that confirm prior fin dings with respect to competition but differ from prior findings with respect to cost structure and growth opportunities. Overall the eviden ce suggests that accounting earnings reflect information about future economic rents generated by firms' assets-in-place. The evidence also suggests, contrary to prior studies, that accounting earnings are not very informative about firms' growth opportunities.