One of the factors that previous studies have identified as an influential factor in Earning Response Coefficient (ERC) is default risk. The purpose of this study is to investigate the relationship between default risk and Earnings Response Coefficient in Tehran stock exchange during the years 1388 to 1391. This study used two proxies to measure default risk; leverage ratio and f-score. To test the effect of default risk on earnings response coefficients, reverse regression of abnormal returns and unexpected earnings is used and the effect of systematic risk and the growth opportunity on earnings response coefficients are controlled. The results of the study reveal a significant negative relationship between default risk and ERC. Results indicate that default risk is not only important for creditors, but it is also important for investors and affects their reaction to good and bad news from earning announcement.
Ebrahimi Kordlar, A., & Mohammadi Shad, Z. (2014). Investigating the Relationship between Default Risk and Earning Response Coefficient (ERC). Accounting and Auditing Review, 21(1), 1-18. doi: 10.22059/acctgrev.2014.50780
MLA
Ali Ebrahimi Kordlar; Zohreh Mohammadi Shad. "Investigating the Relationship between Default Risk and Earning Response Coefficient (ERC)", Accounting and Auditing Review, 21, 1, 2014, 1-18. doi: 10.22059/acctgrev.2014.50780
HARVARD
Ebrahimi Kordlar, A., Mohammadi Shad, Z. (2014). 'Investigating the Relationship between Default Risk and Earning Response Coefficient (ERC)', Accounting and Auditing Review, 21(1), pp. 1-18. doi: 10.22059/acctgrev.2014.50780
VANCOUVER
Ebrahimi Kordlar, A., Mohammadi Shad, Z. Investigating the Relationship between Default Risk and Earning Response Coefficient (ERC). Accounting and Auditing Review, 2014; 21(1): 1-18. doi: 10.22059/acctgrev.2014.50780
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