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Business cycle is a kind of volatility found in agregate economic activity as an impression of the presence of macro-financial risks. In the literature, it is clarified that the business cycle and firm’s performance are unequivocally interconnected, however not continually having shared connections. These cycles for the most part comprise of two periods of expansion stage, recession or contraction stage. In this study, we analyze the effect of bussiness cycles on firm’s earning persistence. Different from the existing studies, in term of identifying cycles (expansion and contraction periods), our approach relies on the results of markov switching model applying the ASEAN-5 data (Indonesia, Malaysia, Singapore, Thailand and the Philippines). The results show that in the expansion regime, earnings persistence is higher than during the contraction regime. This results support that the bussiness cycle has significant effect on the earnings persistence as explained by the theory

Business Cycles, Regime Switching, Earnings Persistence