A TIME-SERIES APPROACH TO MEASURING THE DECLINE IN QUARTERLY EARNINGS PERSISTENCE

Although prior research documents an inter-temporal decline in earnings relevance for equity investors, precise evidence has not been collected on why the decline has occurred. We document a substantial decline in the persistence of quarterly accounting earnings over a 35-year period for a sample of New York Stock Exchange firms. Our findings hold regardless of whether firms are in industries with dramatic increases in spending on information technology through time or not. Further, neither ex ante measures of expected economic change (changes in barriers-to-entry and product type) nor an ex post measure of economic change (quarterly sales persistence) decline inter-temporally for our sample firms.