Sustainable Performance and Earnings Momentum-The Role of Economic
Wen-Chyan Ke/Department of Finance and Cooperative Management, National Taipei University
Huai-Yuan Hu/Department of Finance and Cooperative Management, National Taipei University
Chang Chan/Graduate School of Humanities and Social Sciences, Dharma Drum Institute of Liberal Arts
Abstract
Earnings momentum is a crucial topic in market efficiency research. Meanwhile, a company's sustainable performance serves as a key indicator for evaluating its ability to achieve long-term sustainable development. Analyzing data from SEED's sustainability evaluation database for Taiwan-listed firms (developed in collaboration with Taipei University and Taiwan Index Plus Corporation), this study investigates the impact of sustainable performance on earnings momentum during 2015-2020. Empirical results reveal that companies with strong positive earnings information in Taiwan's stock market exhibit a gradually increasing trend in cumulative abnormal returns after earnings announcements, indicating earnings momentum. Interestingly, firms with robust economic sustainability performance (including corporate governance) experience lower earnings momentum. This suggests that good corporate governance enhances information transparency, leading to more efficient investor reactions and stock price responses to earnings information. Additionally, the study highlights that Taiwan's earnings momentum primarily stems from company characteristics, with sustainability factors also playing a role. This result provides a more comprehensive explanation of Taiwan's earnings momentum.
Keywords
Earnings momentumESGCumulative abnormal return
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