Determinants Of Earnings Variability

Abstract

Corporate earnings variability (EVAR) affects earnings predictability and firm value. Given the importance of EVAR to the business community, it is surprising that research identifying its determinants has not received more attention. In this study, firm and industry characteristics associated with cross-sectional differences in Value Line EVAR are investigated. Consistent with prior research, regression results indicate that firm size and product durability affect EVAR. The results, however, also indicate that corporate performance, capital structure, and industry membership affect EVAR. Adding these factors produces an improved EVAR model that explains approximately half of the cross-sectional variation in EVAR.