The Role of Disaggregated Earnings for Stock Prices: Evidence from Listed Shipping Firms and Panel Tests

Abstract

This study examines the impact of disaggregated earnings on stock prices for listed shipping firms. It shows that operating and non-operating income from ships sales have higher power in explaining stock prices than operating earnings only as key information for future profitability, investment opportunities and firm valuation. The testing period is from 2000 to 2008. The methodologies are those of panel cointegration and panel causality tests. The empirical findings show that both types of earnings are positively related to stock prices, contrary to the belief that the non-operating component contains little information. The implications are very crucial, since managers may manipulate annual earnings by these non-operating activities.