Table 8 Earnings-returns association for...

Table 8

Earnings-returns association for bankrupt and non-bankrupt firms using the full sample (1987–2015)

Variables	Full sample	Non-bankrupt	Bankrupt
D (β₁)	−0.00325 (−1.25)	−0.00422* (−1.92)	−0.0311 (−0.96)
R (β₂)	0.0289*** (9.07)	0.0309*** (11.28)	0.00955 (0.26)
DR (β₃)	0.155*** (14.10)	0.0993*** (11.64)	0.127* (1.84)
Constant	0.0658*** (6.20)	0.0589*** (5.46)	0.118*** (3.61)
Year fixed effects	Yes	Yes	Yes
Observations	12,681	12,097	584
R²	0.134	0.138	0.091

Variables	Full sample	Non-bankrupt	Bankrupt
D (β₁)	−0.00325 (−1.25)	−0.00422* (−1.92)	−0.0311 (−0.96)
R (β₂)	0.0289*** (9.07)	0.0309*** (11.28)	0.00955 (0.26)
DR (β₃)	0.155*** (14.10)	0.0993*** (11.64)	0.127* (1.84)
Constant	0.0658*** (6.20)	0.0589*** (5.46)	0.118*** (3.61)
Year fixed effects	Yes	Yes	Yes
Observations	12,681	12,097	584
R²	0.134	0.138	0.091

Note(s): This table reports the results of the robustness tests for the earnings-returns association for the full sample (1987–2015) using OLS regression with year fixed effects. The t-statistics in parentheses are robust and adjusted for firm clustering. X_it/MV_it−1is net income before extraordinary items (Compustat #18), scaled by lagged market value of equity (Compustat #125 * Compustat #199). R is the annual stock return from nine months before fiscal year-end of three months after fiscal year-end from CRSP. D_it = 1 if R_it < 0, and zero otherwise. ***p < 0.01, **p < 0.05, *p < 0.1. Year is a dummy variable for the fiscal year

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