The Brand Value of Earnings : An Event Study of Consumer Responses to Earnings Announcements

We use high frequency consumer perception data to conduct the first event study of consumers’ perceptual responses to earnings announcements. We find that consumers’ attention to brands is heightened around earnings announcements. Moreover, we document that the change in consumers’ overall perception of a brand at the time of the earnings announcement is positively associated with earnings news. Stated alternatively, we document a positive and statistically significant consumer earnings response coefficient (CERC). We document variation in CERC based on brand, consumer, and earnings characteristics. Changes in consumer perceptions at the time of the earnings announcement are positively associated with leading indicators of future sales and with changes in realized future sales growth. Our findings demonstrate the importance of earnings to one of the firm’s most important stakeholders as well as the real economic effects of their responses to earnings news