The Information Content of Operational Effectiveness
Barth M.E. Berkovitch J. Israeli D.
2025John Wiley and Sons Inc
Journal of Business Finance and Accounting
2025
We address whether and why a firms operational effectiveness, (Formula presented.), has information content for investors and what role that information plays in the price discovery process at quarterly earnings announcements. We measure (Formula presented.) using the cash conversion cycle (CCC) multiplied by −1, such that higher (Formula presented.) reflects better operational effectiveness. Higher (Formula presented.) is associated with higher abnormal stock returns and trading volume at earnings announcements and with higher future earnings and cash flows, which helps explain the positive return and volume relations. Higher (Formula presented.) also is associated with larger post-earnings-announcement drift and less timely incorporation of information in earnings announcements into stock prices. However, this relation largely is attributable to firms that announce bad earnings news. Together, we infer that operational effectiveness is informative to investors because it comprises forward-looking information about earnings and cash flows and that announcements of improvements in (Formula presented.) along with bad earnings news impede the price discovery process.
earnings announcements , information content , operational effectiveness , price discovery
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Graduate School of Business, Stanford University, Stanford, CA, United States
Department of Accounting and Corporate Finance, Luiss Guido Carli University, Rome, Italy
Arison School of Business, Reichman University, Herzliya, Israel
Graduate School of Business, Nazarbayev University, Astana, Kazakhstan
Graduate School of Business
Department of Accounting and Corporate Finance
Arison School of Business
Graduate School of Business
10 лет помогаем публиковать статьи Международный издатель
Книга Публикация научной статьи Волощук 2026 Book Publication of a scientific article 2026