Yim, Andrew and Schröder, David (2012): Industry Effects on Firm and Segment Profitability Forecasting: Do Aggregation and Diversity Matter?
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Abstract
Abstract. A recent study shows that industry-specific analysis has no incremental advantage over economy-wide analysis in forecasting firm profitability. This result seems puzzling because some earlier studies have documented the importance of industry effects in explaining firm profitability. We reconcile the apparent inconsistency by showing that industry effects on profitability forecasting exist at the more refined business segment level, but are obscured by aggregated reporting at the firm level. Using segment-level analysis as well as firm-level analysis that also utilizes segment-level information, we provide consistent evidence supporting that industry-specific analysis is more accurate than economy-wide analysis in predicting the profitability of business segments and the profitability of single-segment firms.
Item Type: | MPRA Paper |
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Original Title: | Industry Effects on Firm and Segment Profitability Forecasting: Do Aggregation and Diversity Matter? |
Language: | English |
Keywords: | Segment profitability, Earnings predictability, Earnings persistence, Aggregation, Diversity, Industry membership |
Subjects: | L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting G - Financial Economics > G0 - General > G00 - General M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M21 - Business Economics |
Item ID: | 39190 |
Depositing User: | Andrew Yim |
Date Deposited: | 02 Jun 2012 19:54 |
Last Modified: | 29 Sep 2019 18:47 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/39190 |
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