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%T The predictive ability of relative efficiency for future earnings: an application using data envelopment analysis to Spanish SMEs %A Reverte, Carmelo %A Guzman, Isidoro %J Applied Economics %N 21 %P 2751-2757 %V 42 %D 2008 %K relative efficiency; earnings prediction; DEA; SMEs %= 2011-04-04T13:34:00Z %~ http://www.peerproject.eu/ %> https://nbn-resolving.org/urn:nbn:de:0168-ssoar-242229 %X Research on earnings prediction has documented that the transitory component of current earnings undermines its predictive ability about future earnings. The implication of this finding is that a measure that better captures the underlying persistent component of earnings may prove very useful in predicting future earnings when used along with current earnings. Our study, based on a large sample of 1939 Spanish small and medium enterprises (SMEs), investigates whether an alternative mesure of performance ignored in previous research on earnings forecasting -i.e., relative efficiency- has predictive ability over and above current earnings and book value of equity. Relative efficiency captures the inherent ability of a firm -as compared to other similar firms- to make the most productive use of available resources and is measured using Data Envelopment Analysis (DEA) non-parametric technique. Our findings highlight that our DEA-based efficiency measure has an incremental predictive ability over and above current earnings and book value of equity for predicting future earnings. Moreover, we have further validated the models in a holdout sample and our results evidence the highest forecast accuracy of the model that includes our efficiency measure as an additional predictor to current earnings and book value of equity. %C USA %G en %9 journal article %W GESIS - http://www.gesis.org %~ SSOAR - http://www.ssoar.info