Cost Management and Strings of Increasing Earnings

Barth et al. (1999) document that firms sustaining a string of increasing earnings have higher price-earnings ratios and Myers (2007) find such receive abnormal stock market returns during the periods compared to not exhibiting this pattern. The primary objective current study is improve our understanding how can maintain consecutive earnings. Most on do so by revenues (Ghosh al., 2005). Firms decreasing must effectively manage costs decrease their expenses sufficiently increase those periods. Prior literature does provide insights into characteristics environments allow them over include both revenues. This paper contributes filling gap in using large data shows cost flexibility an important factor associated with firm finds demand uncertainty for firm’s products inversely related ability In addition, examination asymmetric behavior experience at least one sales indicates these are anti-sticky exhibit sticky when ends.