Date of Graduation


Document Type


Degree Name

Doctor of Philosophy in Business Administration (PhD)

Degree Level





Linda Myers

Committee Member

James Myers

Second Committee Member

Gary Ferrier


Analyst forecast, Future earnings, Sg&A costs, SG&A ratio, Selling, general and administrative, Stock return


In fundamental analysis, increases in the ratio of selling, general and administrative (SG&A) costs to sales (SG&A ratio) are viewed as negative signals about future firm performance. However, this interpretation focuses on the overall change in the SG&A ratio and ignores the underlying changes in the components of the ratio. For example, prior literature finds that the interpretation offered by fundamental analysis does not hold during periods of decreasing sales. I contend that a further partitioning of the full sample into subsamples representing all possible combinations of changes in the components of the SG&A ratio, and the ratio itself, will yield incremental information about future firm performance. Accordingly, I identify six subsamples representing these combinations of changes and examine whether they are incrementally informative about future earnings, analyst forecasts, and stock returns. I find that changes in the SG&A ratio in four of my six subsamples are associated with changes in future earnings, and that results from prior literature regarding periods of decreasing sales are driven by a specific set of circumstances. I also find that analysts do not always recognize the information in the signals and incorporate the information into their forecast revisions. Finally, I find that changes in the SG&A ratio in five of my six subsamples provide statistically significant information regarding future stock returns that is not subsumed by the information contained in forecast revisions.