Do industry-level analyses improve forecasts of financial performance

Patricia M. Fairfield, Sundaresh Ramnath, Teri Lombardi Yohn

Research output: Contribution to journalArticle

40 Citations (Scopus)

Abstract

Prior research documents mean reversion in firm profitability and growth under the implicit assumption that profitability and growth of all firms revert to a common benchmark at the same rate. However, a large body of academic research suggests that there are systematic interindustry differences (e.g., industry barriers to entry) that differentially affect firm performance based on industry membership. We evaluate the relative forecast accuracy of mean reverting models at the industry and economywide levels and find that industry-specific models are generally more accurate in predicting firm growth but not profitability. Copyright;

Original languageEnglish (US)
Pages (from-to)147-178
Number of pages32
JournalJournal of Accounting Research
Volume47
Issue number1
DOIs
StatePublished - Mar 1 2009

Fingerprint

Industry
Financial performance
Profitability
Firm growth
Mean reversion
Barriers to entry
Forecast accuracy
Mean-reverting
Benchmark
Firm performance
Academic research
Firm profitability

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Do industry-level analyses improve forecasts of financial performance. / Fairfield, Patricia M.; Ramnath, Sundaresh; Yohn, Teri Lombardi.

In: Journal of Accounting Research, Vol. 47, No. 1, 01.03.2009, p. 147-178.

Research output: Contribution to journalArticle

Fairfield, Patricia M. ; Ramnath, Sundaresh ; Yohn, Teri Lombardi. / Do industry-level analyses improve forecasts of financial performance. In: Journal of Accounting Research. 2009 ; Vol. 47, No. 1. pp. 147-178.
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