“Is the U.S. Unique? International Evidence on the Aggregate Earnings-Returns Association” by Dr. Congcong Li
Accounting & Law Seminar
Dr. Congcong Li
Assistant Professor of Accounting
School of Accountancy
Singapore Management University
We exploit differences in institutional and macroeconomic environments to shed light on what drives variation in the aggregate earnings-returns relation across countries. We find that the aggregate earnings-returns association is primarily driven by two factors-the monetary policy news conveyed in aggregate earnings and the market reaction to that news. Specifically, the aggregate earnings-returns association is more negative (less positive) in countries where aggregate earnings contain more monetary policy news as well as in countries that have a stronger market reaction to monetary policy shocks. We further find that aggregate earnings are more informative about policy changes in countries with stronger investor protection and greater macroeconomic uncertainty. Overall, our study provides new international evidence on what drives the aggregate earnings-returns relation across the globe.