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Abstract:
We create a broad measure of corporate governance, Gov-Score, based on a new dataset provided by Institutional Shareholder Services. Gov-Score is a composite measure of 51 factors encompassing eight corporate governance categories: audit, board of directors, charter/bylaws, director education, executive and director compensation, ownership, progressive practices, and state of incorporation. We relate Gov-Score to operating performance, valuation, and shareholder payout for 2,327 firms, and we find that better-governed firms are relatively more profitable, more valuable, and pay out more cash to their shareholders. We examine which of the eight categories underlying Gov-Score are most highly associated with firm performance. We show that good governance, as measured using executive and director compensation, is most highly associated with good performance. In contrast, we show that good governance as measured using charter/bylaws is most highly associated with bad performance. We examine which of the 51 factors underlying Gov-Score are most highly associated with firm performance. Some factors representing good governance that are associated with good performance have seldom been examined before (e.g., governance committee meets annually, independence of nominating committee). In contrast, some factors representing good governance that are associated with bad performance have often been examined before (e.g., consulting fees less than audit fees paid to auditors, absence of a staggered board, absence of a poison pill). Gompers, Ishii and Metrick (2003) created G-Index, an oft-used summary measure of corporate governance. G-Index is based on 24 governance factors provided by Investor Responsibility Research Center. These factors are concentrated mostly in one ISS category, charter/bylaws, which we show is less highly associated with good performance than are any of the other seven categories we examine. We document that Gov-Score is better linked to firm performance than is G-Index.

Corporate governance, firm performance, gov score, nominating committee, governance committee, option burn rate

Abstract:
Gompers et al. [Gompers, P., Ishii, J., Metrick, A., 2003. Corporate governance and equity prices. Quarterly Journal of Economics 118, 107-155] created G-Index, a summary measure of corporate governance based on 24 firm-specific provisions, and showed that more democratic firms are more valuable. Bebchuk et al. [Bebchuk, L., Cohen, A., Ferrell, A., 2005. What matters in corporate governance? Working Paper, Harvard Law School] created an entrenchment index based on six provisions underlying G-Index, and found it to fully drive the Gompers et al. (2003) valuation results. Both G-Index and the entrenchment index are based on IRRC data that is comprised of anti-takeover measures, focusing on external governance [Cremers, K.J.M., Nair, V.B., 2005. Governance mechanisms and equity prices. Journal of Finance 60, 2859-2894]. We create Gov-Score, a summary governance measure based on 51 firm-specific provisions representing both internal and external governance, and we show that a parsimonious index based on seven provisions underlying Gov-Score fully drives the relation between Gov-Score and firm value. Our results support the Bebchuk et al. (2005) findings that only a small subset of provisions marketed by corporate governance data providers are related to firm valuation, and the Cremers and Nair (2005) evidence that both internal and external governance are linked to firm value. The 51 governance provisions we consider include five that are relevant to accounting and public policy: stock option expensing, and four that are audit-related. We find none of these five measures to be related to firm valuation. We document that only one of the seven governance provisions important for firm valuation was mandated by either the Sarbanes-Oxley Act of 2002 or the three major US stock exchanges. We provide researchers with an alternative measure of governance to G-Index with three distinct advantages: (1) broader in scope of governance, (2) covers more firms, and (3) more dynamic, reflecting recent changes in the corporate governance environment.

Corporate governance, firm valuation, anti-takeover, internal and external governance

Abstract:
We rank accounting Ph.D. programs and accounting faculties based on downloads individuals' working papers posted to the Social Science Research Network (SSRN) receive.We retain 185 individuals included in Accounting Faculty Directory 2002-2003 (Hasselback, 2002) whose work has been most heavily downloaded as of August 21, 2002. We rank Ph.D. programs (faculties) both adjusting and not adjusting for program (faculty) size. We provide rankings both without regards to when individuals graduated and for individuals graduating during three consecutive sub-periods: pre-1982, 1982-1991 and 1992-2001. We first provide rankings without regards to teaching or research area. After dichotomizing individuals into those whose teaching/research area is financial versus non-financial we provide additional rankings focusing on non-financial research areas.

downloads, accounting Ph.D. program rankings, accounting faculty rankings, social science research network

Abstract:
Prior research has shown that pro-forma (recurring operating) earnings reported by managers and analysts are more value relevant than GAAP net income. Since GAAP net income contains many non-operating items that reduce its value relevance compared to operating earnings, comparing the value relevance of GAAP net income with operating earnings unduly favors operating earnings. We show that operating earnings reported by managers and analysts are more value relevant than a measure of operating earnings derived from firms' financial statements, as reported by Standard and Poor's. Our evidence is important because it indicates that operating earnings reported by managers and analysts contain value relevant information beyond that provided by operating earnings obtained by sophisticated users from firms' financial statements.

Abstract:
I use a new approach to rank journals, namely the number and percent frequency of articles a journal publishes that are heavily downloaded from the Social Science Research Network (SSRN). I rank 18 accounting and finance journals, and I identify five journals not considered by the two most recent major published ranking studies of publications by accounting faculty, namely (in rank order): Journal of Financial Economics, Review of Accounting Studies, Review of Quantitative Finance and Accounting, Journal of Corporate Finance, and Journal of International Financial Management and Accounting. I show that financial accounting faculties are more likely to post their working papers to SSRN, and papers posted by financial faculties generate more downloads. I mitigate this bias in favor of the financial area by providing separate rankings based on authors in the financial versus non-financial areas.

Abstract:
Managerial behavior differs considerably when managers report quarterly profits versus losses. When they report profits, managers seek to just meet or slightly beat analyst estimates. When they report losses, managers do not attempt to meet or slightly beat analyst estimates. Instead, managers often do not forewarn analysts of impending losses, and the analyst's signed error is likely to be negative and extreme (i.e., a measured optimistic bias).

Brown (1997 Financial Analysts Journal) shows that the optimistic bias in analyst earnings forecasts has been mitigated over time, and that it is less pronounced for larger firms and firms followed by many analysts. In the present study, I offer three explanations for these temporal and cross-sectional phenomena. First, the frequency of profits versus losses may differ temporally and/or cross-sectionally. Since an optimistic bias in analyst forecasts is less likely to occur when firms report profits, an optimistic bias is less likely to be observed in samples possessing a relatively greater frequency of profits. Second, the tendency to report profits that just meet or slightly beat analyst estimates may differ temporally and/or cross-sectionally. A greater tendency to 'manage profits' (and analyst estimates) in this manner reduces the measured optimistic bias in analyst forecasts. Third, the tendency to forewarn analysts of impending losses may differ temporally and/or cross-sectionally. A greater tendency to 'manage losses' in this manner also reduces the measured optimistic bias in analyst forecasts.

I provide the following temporal evidence. The optimistic bias in analyst forecasts pertains to both the entire sample and the losses sub-sample. In contrast, a pessimistic bias exists for the 85.3% of the sample that consists of reported profits. The temporal decrease in the optimistic bias documented by Brown (1997) pertains to both losses and profits. Analysts have gotten better at predicting the sign of a loss (i.e., they are much more likely to predict that a loss will occur than they used to), and they have reduced the number of extreme negative errors they make by two-thirds. Managers are much more likely to report profits that exactly meet or slightly beat analyst estimates than they used to. In contrast, they are less likely to report profits that fall a little short of analyst estimates than they used to. I conclude that the temporal reduction in optimistic bias is attributable to an increased tendency to manage both profits and losses. I find no evidence that there exists a temporal change in the profits-losses mix (using the I/B/E/S definition of reported quarterly profits and losses).

I document the following cross-sectional evidence. The principle reason that larger firms have relatively less optimistic bias is that they are far less likely to report losses. A secondary reason that larger firms have relatively less optimistic bias is that their managers are relatively more likely to report profits that slightly beat analyst estimates. The principle reason that firms followed by more analysts have relatively less optimistic bias is that they are far less likely to report losses. A secondary reason that firms followed by more analysts have relatively less optimistic bias is that their managers are relatively more likely to report profits that exactly meet analyst estimates or beat them by one penny. I find no evidence that managers of larger firms or firms followed by more analysts are relatively more likely to forewarn analysts of impending losses. I conclude that cross-sectional differences in bias arise primarily from differential 'loss frequencies,' and secondarily from differential 'profits management.'

The paper discusses implications of the results for studies of analysts forecast bias, earnings management, and capital markets. It concludes with caveats and directions for future research.

Abstract:
Using a unique dataset provided by Institutional Shareholder Services (ISS), we relate 51 governance provisions to firm operating performance as proxied by return on assets and return on equity. We identify six corporate governance provisions that are significantly and positively linked to return on assets, return on equity or both using at least two of our six regressions. We examine nine governance provisions that have been recently mandated by the three major U.S. stock exchanges, and we find none of them to be significantly and positively related to firm operating performance. Our results reveal that the governance provisions recently mandated by the U.S. stock exchanges are less closely linked to firm operating performance than are those not so mandated.

Corporate governance, Firm operating performance, U.S. stock exchanges

Abstract:
Using a unique dataset provided by Institutional Shareholder Services (ISS), we relate 51 governance provisions to firm operating performance as proxied by return on assets and return on equity. We show that seven (six) governance provisions are significantly and positively related to return on assets (equity) using at least two of three econometric approaches. We identify 10 corporate governance provisions that are positively linked to return on assets, return on equity or both using at least two of our three econometric approaches. Nine of the corporate governance provisions we examine have recently been mandated by the three major U.S. stock exchanges but only one of them, nominating committee is comprised solely of independent outside directors, is significantly and positively related to firm operating performance. Our results reveal that the corporate governance reforms recently mandated by the three major U.S. stock exchanges are not more closely linked to firm operating performance than are those not so mandated.

Corporate governance, Firm operating performance, U.S. stock exchanges, Nominating committee

Abstract:
Applying a Burgstahler and Dichev (1997)/Degeorge et al. (1999) type methodology to quarterly data for the 1985-2002 time period, we show that, since the mid-1990s, but not before then, managers seek to avoid negative quarterly earnings surprises more than to avoid either quarterly losses or quarterly earnings decreases. Our findings suggest that the quarterly earnings threshold hierarchy proposed by Degeorge et al. (1999) does not apply to recent years, and that managers' claim that avoiding quarterly earnings decreases is the threshold they most seek to achieve (Graham et al. 2004) is inconsistent with their actions. We provide an intuitively appealing economic rationale for why the shift in threshold hierarchy occurred; since the mid-1990s, but not before then, investors unambiguously rewarded (penalized) firms for reporting quarterly earnings meeting (missing) analysts' estimates more than they did for meeting (missing) the other two thresholds. We provide several explanations for why investors unambiguously reward firms for reporting quarterly earnings that meet or beat analysts' estimates more than for meeting the other two thresholds late (but not early) in our sample period: increased media coverage given to analyst forecasts, more analyst following, more firms covered by analysts, and temporal increases in both the accuracy and precision of analyst forecasts.

Thresholds, propensities, valuation consequences, temporal changes, analyst estimates

Abstract:
The Wall Street Journal rates analysts on the basis of past earnings forecast accuracy. These analyst ratings are important to practitioners who believe that past accuracy portends future accuracy. An alternative way to assess the likelihood of "more" or "less" accurate forecasts in the future is to model the analyst characteristics related to the accuracy of individual analysts' earnings forecasts. No evidence yet exists, however, as to whether an analyst characteristics model is better than a past accuracy model for distinguishing more accurate from less accurate earnings forecasters. I show that a simple model of past accuracy performs as well for this purpose as a more complex model based on analyst characteristics. The findings are robust to annual and quarterly forecasts and pertain to estimation and prediction tests. The evidence suggests that practitioners' focus on past accuracy is not misplaced: It is as important as five analyst characteristics combined.

Abstract:
The Wall Street Journal rates analysts on the basis of past earnings forecast accuracy. These analyst ratings are important to practitioners who believe that past accuracy portends future accuracy. An alternative way to assess the likelihood of "more" or "less" accurate forecasts in the future is to model the analyst characteristics related to the accuracy of individual analysts' earnings forecasts. No evidence yet exists, however, as to whether an analyst characteristics model is better than a past accuracy model for distinguishing more accurate from less accurate earnings forecasters. I show that a simple model of past accuracy performs as well for this purpose as a more complex model based on analyst characteristics. The findings are robust to annual and quarterly forecasts and pertain to estimation and prediction tests. The evidence suggests that practitioners' focus on past accuracy is not misplaced: It is as important as five analyst characteristics combined.

Abstract:
While numerous intuitively appealing characteristics of individual analyst earnings forecast accuracy have been identified, the extant literature has provided no evidence regarding the out-of-sample predictive validity of these characteristics. We examine whether these characteristics possess incremental predictive ability vis-a-vis forecast age, the control variable of these studies. We compare the predictive ability of a consensus forecast based solely on forecast age (Age) with that of a six-factor model consisting of forecast age plus five analyst characteristics suggested by the literature (Model). We use the dual evaluative criteria suggested by Foster (1977) and employed numerous times thereafter to assess predictive ability: (1) the ability to predict the next number in the time series and (2) the ability to approximate the capital market's earnings expectation.

We show that Age predicts as well as Model using both predictive ability criteria. Because Model consists of Age plus five other factors, it is cost-beneficial to use Age in lieu of Model for predictive purposes. FASB Statement of Financial Accounting Concepts No. 2 (1980) identifies predictive value as a criterion of information relevance. We show that analyst characteristics have no relevance for the purpose of obtaining better predictions of the next quarterly earnings number vis-a-vis a simpler model based on forecast age. There are many reasons for identifying individual analyst-based characteristics, but predictive ability of the next quarterly number is not one of them.

Predictive ability, Trading profits, Forecast timeliness, Analyst characteristics

Abstract:
We examine the overall and individual analyst accuracy of 12-month-ahead target price forecasts. On average, expected returns exceed actual returns by 35% and only 24 (45) percent of target price forecasts are met at the end of (sometime during) the 12-month period. We show that analysts do not exhibit persistent differential abilities to forecast target prices. Although the market response to target price forecasts is significant, the market acts as if sell-side analysts do not exhibit persistent differential abilities to forecast target prices. We show that the analysts in our sample exhibit persistent differential abilities to forecast earnings, but superior earnings forecasting abilities do not portend superior target price forecasting. We interpret our results as follows. Analyst earnings forecast accuracy is subject to considerable scrutiny and it impacts analyst compensation. In contrast, target price forecasts are neither subject to market scrutiny nor are they related to compensation so there is no ex post settling up for the absence of target price forecast accuracy. Thus, analysts face stronger incentives to provide accurate earnings forecasts than for target prices.

Analysts, Target Prices, Earnings Forecasts, Valuation

Abstract:
The extant literature has concluded that stock prices do not fully reflect the implications of current earnings for future earnings. This evidence is based on random samples of firms, whose quarterly earnings are assumed to be generated by the same, relatively complex, Brown-Rozeff (1979, BR hereafter) process. It is conceivable that model complexity is the source of the market's failure to fully reflect the implications of current earnings for future earnings. The purpose of this study is to determine whether stock prices fully reflect the implications of current earnings for future earnings for a subset of firms whose quarterly earnings generating process is much simpler than the BR model. For the entire sample of AR1 firms, we find that stock prices do not fully reflect the implications of current quarterly earnings for future quarterly earnings. They erroneously act as if the error of the AR1 model at lag four has negative valuation implications. When we segment the sample by several proxy variables for firms' information environments (i.e., firm size, number of institutional shareholders, and the existence of security analyst following), we find that the failure of stock prices to fully reflect the implications of current quarterly earnings for future quarterly earnings pertains only to firms with less predisclosure information. When we examine the relation between current earnings surprise and contemporaneous and future CARs, we obtain additional insights into what stock prices do not understand about firms with less predisclosure information. For firms with less predisclosure information, the failure of stock prices to fully reflect the implications of current quarterly earnings for future quarterly earnings pertains to large positive surprises, but not to large negative ones.

Abstract:
We examine the affiliation performance and publication performance of 1991-1997 accounting Ph.D. graduates. We define affiliation performance as whether or not an individual is employed at a school with an accounting program ranked by Trieschmann et al. (Academy of Management Journal 43:1130-1141, 2000). We define publication performance in two ways, whether or not the Ph.D. graduate published in at least one of: (1) three premier accounting journals, and (2) a broader set of eight accounting journals. We examine the influence of the institutional status (private versus public) of the graduating institution on both affiliation performance and publication performance. We examine the institutional status both unconditionally and conditionally on four article types published in three premier journals: (1) articles from Ph.D. dissertations, (2) co-authored articles with degree-school faculty, (3) co-authored articles with degree-school Ph.D. students, and (4) co-authored articles with affiliated faculty. We show that accounting graduates of private schools are more likely to be affiliated with higher ranked schools, but they are not more likely to publish in the premier journals or the broader set of eight journals.

Ph.D. programs, Publication performance, Affiliation performance

Abstract:
This paper examines whether managers in the U.S. manage earnings, profits and losses surprises to a greater extent than do managers in 12 other countries. We expect managers in the U.S. to be more likely to manage earnings, profits and losses surprises than do managers in other countries since U.S. managers have greater incentives to monitor current price performance. These incentives include greater equity ownership by top executives, more monitoring by institutional and large shareholders, a larger number of outside directors on their board of directors, a greater threat of external takeovers, and a more litigious environment. Consistent with our expectations, we find that managers in the U.S. manage earnings surprises relatively more than do managers in 12 other countries. More specifically, U.S. managers are more likely to manage profits surprises than do managers in all 12 other countries examined, and they are more likely to manage losses surprises than do managers in all other countries except Japan, the only country requiring managers to forecast earnings. We also expect U.S. managers to be more likely to manage analysts' estimates, given their extensive public relations departments and their greater incentives to manage earnings surprises. Our evidence bears out our contention.

Abstract:
We consider forecast guidance as a mechanism that managers use to avoid negative earnings surprises. Modeling forecast guidance using methods by Matsumoto, [Accounting Review 77 (3) (2002) 483-514] and Bartov et al. [Journal of Accounting and Economics 33 (2) (2002) 173-204], we show that managers in strong-investor-protection countries are more likely to utilize forecast guidance to avoid negative earnings surprises than managers in weak-investor-protection countries. We also show that US managers are more prone to use forecast guidance to avoid negative earnings surprises than managers in other countries. Our results provide insight into the information dissemination process and how managers behave in response to weak regulation of informal disclosures in different investor protection environments.

Forecast guidance, Analysts, Earnings, International, Investor protection

Abstract:
While brokerage houses use both teams of sell-side analysts and individual analysts to conduct earnings research, there is no empirical research examining if teams and individuals differ with regard to their forecasting performance or purpose, and if so, how and why. We first examine the most-often researched dimension of forecasting performance, earnings forecast accuracy, and we show that teams are less accurate than individual analysts in general and their own individual team members in particular. We conjecture that teams focus their efforts on an alternative dimension of forecasting performance, timeliness, and we show that team forecasts are timelier than those of individual analysts in general and their own individual team members in particular. Consistent with the notion that teams trade-off forecast accuracy for timeliness to comply with a market research demand, we show that team forecast revisions are associated with larger market responses than those of individuals. Finally, we shed light on the nature of team assignments by documenting that the firms teams follow are in greater financial distress (representing a greater need for timely information) and larger (representing a larger forecasting task).

Teams, Earnings forecasts, Accuracy, Timeliness

Abstract:
Managers play earnings surprise games to avoid negative earnings surprises by managing earnings upward or by managing analysts' earnings expectations downward. We investigate the effectiveness of the financial reporting process at restraining earnings surprise games. Because the annual reporting process is subject to an independent audit and more rigorous expense recognition rules than interim reporting, it provides managers with fewer opportunities to manage earnings upward. We document that, relative to interim reporting, annual reporting reduces the likelihood of income-increasing earnings management and, to a lesser extent, of negative surprise avoidance, but increases the magnitude of downward expectations management. Our findings suggest that regulatory attempts to monitor corporations' internal checks and balances are likely to be more effective at curbing upward earnings management than at mitigating negative surprise avoidance.

Financial reporting process, annual reporting, interim reporting, earnings surprise games, earnings management, expectations management, analyst forecasts

Abstract:
We investigate the determinants and consequences of the changes in option-based compensation for the top five executives around the issuance of SFAS 123R. We find that the reduction in the proportion of total compensation paid in employee stock options (ESOs) increases in (1) the firm's tendency to take advantage of ESO's favorable accounting treatment to report higher earnings in the pre-expensing period (as proxied by debt contracting concerns, pressure to meet or beat earnings benchmarks and corporate governance strength); and (2) the amount of ESO expense to be recognized upon adopting SFAS 123R (as proxied by the values of annual ESO grants and unvested outstanding ESOs pre SFAS 123R). Our findings are consistent with ESOs' favorable accounting treatment prior to SFAS 123R having a significant effect on boards' executive compensation decisions. We show that firms were more likely to replace ESOs with restricted stock but not with other forms of compensation post SFAS 123R. The substitution between restricted stock and ESOs, however, was far less than dollar for dollar, and that ESO cutbacks around the issuance of SFAS 123R resulted in reduced abnormal compensation.

Employee stock options, SFAS 123R, Executive compensation

Abstract:
Many investment practitioners rely on the 'January Barometer', namely, they believe in the theory of 'as goes January, so goes the year', which is fundamentally related to the well-known January effect. Unlike many prior studies that examined the well-known January effect per se, we investigate the issue of whether or not the signs of January returns have superior predictive value for future stock returns vis-a-vis the predictive value of the signs of returns in any other calendar month.

Using NYSE equal-weighted stock index, we confirm the existence of the January effect in the sample period of 1941-2002 with both unconditional and conditional evidence, and we document two additional manifestations of the well-known January effect. We also introduce a new type of January effect, namely the signs of January returns have superior predictive value vis-a-vis the signs of any other calendar month's returns for the purpose of predicting the next 12-months' returns.

January effect, signs of current returns, predicting future returns

Abstract:
Please enter abstract text here.

Abstract:
Since the early 198Os, earnings forecasting research has become much more closely aligned with capital markets research. Capital markets research requires a proxy for the (unobservable) market earnings expectation and earnings forecasting research has provided such proxy measures. Questions considered in this paper include: (1) if annual earnings follow a random walk or an IMA (1, 1) model, does this mean that earnings changes cannot be predicted? (2) Do stock prices act as if quarterly earnings follow a seasonal random walk with drift process? (3) Is the predictive mode1 which is best on the forecast accuracy dimension also best on the market association dimension? (4) How do analysts formulate their earnings expectations? (5) What is the role of earnings forecasting in `earnings response coefficient' and `post-earnings announcement drift' studies? (6) What is the likely role of earnings forecasting research in future capital market studies?

Earnings forecasting; Forecast accuracy; Market association; Post-earnings announcement drift; Future research

Abstract:
Editors exhort authors to circulate and present their working papers to colleagues before submitting them to journals (Zimmerman 1989; Green et al. 2002). Authors heeding such advice are said to increase the likelihood of getting their work published and making their research, once published, more influential (Zimmerman1989). While evidence regarding these matters is of keen importance to authors, editors and administrators, no research exists showing that circulating and presenting manuscripts increases their probability of being accepted in accounting journals or, when published, their influence on stimulating other research. I present such evidence by perusing acknowledgments in premier accounting journals.

I examine the relation between circulating and presenting manuscripts and the probability of acceptance by relating acknowledgments of 305 papers submitted to The Accounting Review during June 2002-May 2003 to the editor's reject versus revise and resubmit decision. I examine the relation between circulating and presenting manuscripts and an article's influence by relating the acknowledgments in 256 articles published in The Accounting Review, Journal of Accounting Research, and Journal of Accounting and Economics to citations to these articles.

My two analyses of acknowledgments to institutions, conferences, and individuals yield similar results. I find that papers presented at more workshops are more likely to be invited back to The Accounting Review, and that papers published in The Accounting Review, Journal of Accounting and Economics, or Journal of Accounting Research generate more citations if they were presented previously at more workshops.

Acknowledgements, Publication Success, Article Influence

Abstract:
We investigate the causes and consequences of changes in option-based compensation for the top five executives around the issuance of SFAS 123R, which requires firms to expense the fair value of their employee stock options (ESOs) on their income statements. We hypothesize that firms with greater tendencies to substitute ESOs for other forms of compensation to report higher earnings pre SFAS 123R cut back more on ESOs. Consistent with our hypotheses, we find that reduction in the proportion of total compensation paid in ESOs increased in the firm's propensity to take advantage of ESOs' favorable accounting as proxied by debt contracting concerns, tendency to achieve earnings benchmarks using ESOs' favorable accounting treatment, corporate governance weakness, and if the firm accelerated vesting of outstanding ESOs in response to SFAS 123R. We show that firms replaced ESOs with restricted stock post SFAS 123R, but the substitution was less than dollar for dollar. We also find that ESO cutbacks around the issuance of SFAS 123R reduced abnormal compensation without harming firms' operating performance.

Employee stock options, SFAS 123R, Executive compensation

Abstract:
We investigate firms' propensity to meet analysts' forecasts of cash flows and earnings, and identify factors pertaining to market valuation, financial analysts, and firms' financial condition to explain why firms sometimes meet cash flow forecasts but miss earnings forecasts. Firms meet cash flow forecasts but miss earnings forecasts nearly 75 percent as often as they meet earnings forecasts but miss cash flow forecasts. Firms are more likely to meet cash flow forecasts but miss earnings forecasts when: (1) the adverse valuation consequences of doing so are less severe; (2) analyst following of cash flows vis-a-vis earnings is large; (3) analysts forecast extreme positive accruals; (4) analysts downwardly revise cash flow but not earnings forecasts; (5) firms are in financial distress; (6) firms have inflated balance sheets; and (7) firms report decreases in earnings but not cash flows. We contribute to the literature exploring the importance of analysts' cash flow forecasts.

Analyst forecasts, Cash flow forecasts, Earnings forecasts, Meeting or missing forecasts

Abstract:
Using a large sample of quarterly observations for the 16 years, 1984-99, I present four types of related temporal evidence: (1) a decrease in the tendency of managers to report quarterly earnings that fall slightly short of analyst estimates [small negative surprises of no more than three cents]; (2) the temporal decrease in the tendency of managers to report small negative surprises pertains more to growth than to value firms; (3) the adverse valuation consequence of reporting small negative surprises has increased in severity in recent years; and (4) the temporal increase in the adverse valuation consequence of reporting small negative surprises pertains more to growth than to value firms. My frequency results are robust to alternative definitions of small negative surprises, and my valuation results are robust to including median surprises as a potential correlated omitted variable and are not due to temporal changes in the frequency of losses.

Temporal trend, Earnings, Analysts, Small negative surprises, Frequency, Valuation consequences, Growth versus value

Abstract:
In this article, we compare several candidate time-series models for the time-series of quarterly accounting earnings per share. One Box-Jenkins model dominates in terms of forecast accuracy. This model is a Box-Jenkins (1,0,0) x (0,1,1) model.

quarterly earnings per share model, accounting earnings model, time-series earnings model

Abstract:
This study utilizes the Accounting Research Directory to identify influential articles and individuals. Influence is defined in terms of cites per year by five leading accounting journals. The top 100 articles are identified, and the 26 papers defined as classics am content analyzed to determine the contextual framework in which citation takes place. The 123 individuals whose body of work constitutes a classic (i.e. cited at least four times per year since year of publication) are identified, and these data are used to rank individuals, Ph.D. granting institutions and faculties.

Abstract:
Many investment practitioners rely on the January barometer, which argues that: as goes January, so goes the rest of the year (i.e., the next 11 months). Hensel and Ziemba (1995) investigated the validity of the January barometer, concluding that it works well, especially when January is an up month. However, their research design lacks a benchmark so one cannot infer from their study if January is special vis-a-vis other calendar months. We benchmark the January barometer against other calendar month barometers by examining returns in the 11 calendar months subsequent to each of the12 calendar months. In contrast to Hensel and Ziemba (1995), we show that the January barometer is an excellent bearish indicator when January is a down month, but it is a poor bullish indicator when January is an up month. Our results suggest that investors should treat a down January as a signal to stay out of the market, but that they should not treat an up January as a buy signal for the next 11 months.

January barometer, signs of calendar month returns, predicting future returns

Abstract:
We examine analyst forecasts of 26 macroeconomic statistics over the August 1998 to March 2007 time period. We pose four research questions: (1) Does forecast accuracy persist?; (2) What are the determinants of such persistence?; (3) Do analysts who exhibit these characteristics make more accurate forecasts than the simple consensus?; and (4) Is a "smart" consensus based on individuals exhibiting these characteristics more accurate than the simple consensus? We show that analyst forecast accuracy persists and is determined by long-term, past accuracy and the overall ability in forecasting all statistics. That is, analyst long-term track record is more important than short-term track record, and track record in forecasting other statistics (general ability) is more important than track record in forecasting the macroeconomic statistic in question (specific ability). We demonstrate that a smart consensus conditioned on forecasts of analysts with superior long-term, general ability outperforms commonly reported mean and median consensus forecasts.

Individual analyst forecasts, consensus forecasts, smart consensus, short-term and long-term track record, specific and general ability

Abstract:
The process by which analysts revise quarterly earnings forecasts is analyzed and compared to the way in which several time-series models of quarterly earnings revise forecasts. A significant portion of the analyst's forecast revision is explained by the most recent one-quarter-ahead forecast error. Analyst revisions are adaptive in the same manner that single-period ahead model forecasts are adaptive. At longer horizons, the evidence is that analysts revise forecasts in the same way that autoregressive models of quarterly earnings revise and not as moving average models do.

analyst forecasts, earnings, adaptive expectations, earnings forecast errors

Abstract:
Little attention has been paid to a principal decision context in which analysts' earnings forecasts are prepared, namely, as an input to their recommendations. We use two data sets, Value Line, USA, and Research Evaluation Service, Canada, and examine the importance of analysts' earnings forecasts for their stock price forecasts via three hypotheses: (1) analysts' earnings forecasts are important for their stock price forecasts; (2) analysts' long-term earnings forecasts are more important than their short-term earnings forecasts for their predictions of stock prices over a particular stock price forecast horizon; (3) the importance of analysts' earnings forecasts for their stock price forecasts rises as the joint earnings and stock price forecast horizon increases. We show that: (1) when the earnings forecast horizon is the next fiscal year, forecasted earnings explain only 30% of the variation in forecasted price; (2) the importance of forecasted earnings for forecasted price rises as the earnings forecast horizon increases; (3) in the long run, (i.e. three to five years hence), forecasted earnings explain about 60% of the variation in forecasted price. Decision usefulness is an ex ante concept, but tests regarding the usefulness of earnings for stock price generally have used actual (not expectational) data. Our evidence suggests that earnings expectations are decision useful, where the decision context is sell-side analysts' stock price forecasts. Our results are potentially important to users of sell-side analyst research reports. When a stock recommendation is accompanied only by short-run earnings forecasts, investors need to closely examine estimates of non-earnings variables to assess the quality of stock recommendations. In contrast, when stock recommendations are accompanied by both short-run and long-run earnings forecasts, investors need to examine estimates of non-earnings information variables less closely.

Analysts, Earnings forecasts, Stock price forcasts, Value line (USA), Research evaluation service (Canada)

Abstract:
The state of the art in the analyst forecasting literature is that earnings forecast ability is firm-specific (Chen, Francis, and Jiang 2005; Chen and Jiang 2006). This view is based on Park and Stice (2000)'s finding of the absence of a spillover effect; i.e., when reacting to analyst forecast revisions of firm j, investors ignore analyst forecast ability with respect to firm k. We provide an economic rationale for the absence of a spillover effect. We demonstrate that firm-specific ability is far more important than the spillover effect for the purpose of distinguishing between superior and inferior analysts in holdout periods, suggesting that investors are rational to pay little heed to this effect. We examine the issue of whether analyst earnings forecast ability is firm specific by introducing a general ability effect, defined as analyst accuracy for all the other firms s/he follows. We show that general ability is far more important than firm-specific ability for the purpose of distinguishing between superior and inferior analysts in holdout periods. We also document that investors are rational with respect to general ability; when reacting to analyst forecast revisions, they pay more attention to general ability than to firm-specific ability. We conclude that analyst earnings forecast ability is not firm-specific and that investors are rational regarding the relative attention they pay to general ability (much), firm-specific ability (some) and the spillover effect (none).

forecast accuracy, analysts, firm-specific ability, general ability, spillover

Abstract:
We evaluate an industry disclosure initiative designed to inform investors, the practice of providing information regarding investment professionals’ backgrounds. Implicit in the motivation for this initiative is the presumed relevance of background information to investors seeking investment professionals’ guidance. We find that analysts with disclosure incidents forecast less accurately than a matched sample of analysts without such disclosures, and that the market views disclosed analysts’ earnings forecasts as less credible than those of the matched sample. Our evidence is consistent with disclosures signaling a persistent analyst characteristic. We conclude that analyst backgrounds are informative regarding both the accuracy and credibility of their earnings forecasts, and that investors who are uninformed as to an analyst’s background can benefit from these disclosures.

analysts, earnings forecasts, professionalism, self-regulation

Abstract:
If both producers and consumers demand forecasts based solely on their forecasting ability, then the equilibrium employment of analysts, a higher cost factor than time series models, implies that analysts must produce better forecasts than time series models. Past studies of comparative earnings forecast accuracy have concluded otherwise. Using nonparametric statistics that provide proper yet powerful tests, we find that Box-Jenkins time series models consistently produce better forecasts than martingale and submartingale earnings models; but Value Line Investment Survey consistently makes significantly better earnings forecasts than the Box-Jenkins models.

earnings forecasts, security analyst forecasts, Box-Jenkins models

Abstract:
Evidence is provided of security analyst (SA) superiority relative to univariate time-series (TS) models in predicting firms' quarterly earnings numbers. It is demonstrated that SA forecast superiority in the sample is attributable to: 1. better use of information that exists on the date that TS model forecasts can be initiated, a contemporaneous advantage, and 2. use of information acquired between the date of initiation of TS model forecasts and the date when SA forecasts are published, a timing advantage.

Abstract:
This research re-examines whether there are differences in the forecast accuracy of financial analysts by comparing their annual earnings per share forecasts. The comparison of analyst forecast accuracy is made on both an ex post (within sample) and an ex ante (out of sample) basis. Early examinations of this issue by O'Brien (1990), Richards (1976), Brown and Rozeff (1980), O'Brien (1987), Coggin and Hunter (1989), Butler and Lang (1991) were ex post and suggest the absence of analysts who can provide relatively more accurate forecasts over multiple years.

Contrary to the results of prior research, and consistent with the belief in the popular press, we document that differences do exist in financial analysts' ex post forecast accuracy. We show that the previous studies failed to find differences in forecast accuracy due to inadequate (or no) control for differences in the recency of forecasts issued by the analysts. It has been well documented in the literature that forecast recency is positively related to forecast accuracy (Crichfield, et al, 1978; O'Brien, 1988; Brown, 1991). Thus, failure to control for forecast recency may reduce the power of tests, making it difficult to reject the null hypothesis of no differences in forecast accuracy even if they do exist.

Abstract:
No abstract available.

Abstract:
An investigation of the relation between earnings surprise and three empirical anomalies-the P/E effect, the size effect, and the Value Line enigma-indicates that the standardized unexpected earnings (SUE) effect appears to be separate and distinct from each of the three. The relations between the SUE phenomenon and firm risk, the appropriateness of the earnings expectations model, and the role of transaction costs are also investigated. The SUE phenomenon is not attributable to inappropriate risk adjustment, use of the "wrong" earnings expectations model, or ignoring transaction costs. The SUE effect may be partly explained by analysts' behavior and is both predictable and profitable. The SUE effect has also been observed in Japan.

Abstract:
Estimates of future quarterly earnings are of prime importance to capital market participants for formulating their investment decisions. Superior ability to forecast future earnings may enable investors to reap extraordinary returns by trading in the affected securities. The extant forecast accuracy literature has presented convincing evidence that interim accounting data contain predictive value for improving forecasts of annual earnings. But by concentrating upon forecasts of annual earnings, past research has presented no evidence regarding the predictive value of interim data for improving forecasts of future quarterly earnings. Improved annual forecasts are not synonymous with improved forecasts of future quarterly earnings. As the year progresses, the annual earnings forecast generally can be significantly improved by substituting known interim data for their earlier predicted values, leaving intact previous forecasts of future quarterly earnings. By introducing an alternative methodology, evidence is presented that interim data have predictive value for improving forecasts of future quarterly earnings.

earnings forecasts, quarterly earnings

Abstract:
This paper develops and tests an information-based model for conditions under which analysts earnings forecasts are likely to be more accurate than forecasts of time-series models. Three information variables are considered, namely the dimensionality of the information set, the precision of the information items, and the correlation amongst the information items. The respective proxy variables for the information variables are firm size, extent of agreement amongst analysts, and the number of lines of business the firm operates in. Evidence is provided that analysts are likely to be more accurate than time series models for larger firms and for firms whereby analysts have more homogeneous earnings forecasts.

Abstract:
Strong-form efficiency on the Toronto Stock Exchange is examined by focusing on the stock price forecasts of brokerage-firm analysts who follow TSE firms. Two principal analyses are undertaken. First, there is considerable evidence in both the U.S. and U.K. that analysts possess valuable private information at the firm-specific level. This paper provides evidence that this finding is generalizable to Canadian analysts. Second, U.S. and U.K. studies generally have been based on a single-factor model (e.g., the CAPM). The choice of benchmarks (CAPM versus APT) has been shown to be important in a variety of contexts. We provide evidence that the choice of benchmark does not alter the fundamental conclusion that Canadian analysts possess valuable private information at the firm-specific level. Our findings have implications for accounting researchers, namely, the appropriateness of researchers to use CAPM in lieu of the computationally, more burdensome APT and the appropriateness of researchers to use Canadian analyst forecasts when a proxy is required for the (unobservable) market expectation.

Abstract:
While a large stream of literature examines firms' propensities to meet or beat analysts' earnings forecasts, similar research regarding analysts' cash flow forecasts has received little attention in spite of cash flows' importance as a performance measure. We investigate firms' propensities to meet or miss analysts' cash flow and earnings forecasts in the same fiscal quarter. We document that firms are most (least) likely to meet (miss) both forecasts, and second (third) most likely to meet earnings (cash flow) forecasts but miss cash flow (earnings) forecasts. Our findings indicate that this rank ordering of firms' propensities to meet or miss cash flow and earnings forecasts mirrors the rank ordering of the stock price reaction observed for the four meet-or-miss categories. We investigate factors explaining why firms sometimes meet cash flow forecasts but miss earnings forecasts. Our results show that firms are more likely to be in this category when: (1) adverse valuation consequences of missing earnings forecasts but meeting cash flow forecasts are relatively less severe; (2) analyst following of cash flows vis-a-vis earnings is relatively large; (3) firms are in financial distress; (4) analysts forecast extreme positive accruals; (5) analysts walk down their cash flow forecasts but not their earnings forecasts; (6) firms have bloated balance sheets; and (7) firms report decreases in earnings but not cash flows. Our investigation provides insight into firms' propensities to meet or miss forecasts of different performance measures, and furthers our understanding of why firms sometimes meet certain forecasts but miss others.

Analysts' forecasts, cash flows, earnings

Abstract:
We relate the informativeness of earnings and dividend announcements to their timing relative to the fiscal quarter end to which the earnings pertain. Evidence is provided that the information content of earnings decreases as the timing of its announcement relative to the fiscal quarter end increases, and that such information erosion is more pronounced for smaller firms. Evidence is also provided that the information content of dividend announcements increases as its timing relative to the fiscal quarter end increases, and that such information enhancement is relatively more pronounced for larger firms. The results suggest that preannouncement information precision and announced information precision have offsetting effects on the informativeness of financial information, and that the nature of the offset depends on the type of information and firm size. More specifically, the predisclosure information effect is more pronounced for earnings and small firms, whereas the announced (new) information effect is more pronounced for dividends and large firms.

Abstract:
This study examines the association between abnormal returns and five alternative proxies for the market's assessment of unexpected quarterly earnings. We examine the role that measurement error potentially has in multiple regression tests of abnormal returns (occurring around the time of earnings announcements) on an unexpected earnings proxy and other non-earnings variables. The results indicate a potential measurement error interpretation of such multiple regression tests. We examine three procedures which reduce, to an unknown degree, the measurement error problem. Our procedures appear to be more (less) effective at reducing measurement error for small (large) firms and recent (non-recent) forecasts.

Abstract:
Accountants are concerned about the impact of incentive contracts on performance. Monetary incentives improve overall performance, but their effects on the components of performance are not well known. Performance on a repetitive task includes initial performance, subsequent improvement rate, and performance after learning ceases. Monetary incentives can affect any of these factors. This study examines the impact of piece-rate and goal-contingent incentives, versus fixed-pay, on initial performance and subsequent improvement rate in an assembly task. Previous literature has not simultaneously examined these components, which are homologous with the components of the industrial learning curve model. We find that both overall and initial performance, but not improvement rate, are higher in the incentive-pay groups. Two factors may explain the lack of differential improvement rates: subjects? effort allocation, since improving initial performance may be easier than improving subsequent performance; and the nature of these typical incentive-pay plans, which do not reward improvement directly.

Abstract:
Analyst forecasting errors are approximately as large as Dreman and Berry (1995) documented, and an optimistic bias is evident for all years from 1985 through 7996. In contrast to their findings, I show that analyst forecasting errors and bias have decreased over lime. Moreover, the optimistic bias in quarterly forecasts was absent for S&P 500 firms from 1993 through 1996. Analyst forecasting errors are smaller for (1) S&P 500 finns than for other firms; (2) firms with comparatively large amounts of market capitalization, absolute value of earnings forecast, and analyst following; and (3) firms in certain industries.

Abstract:
No abstract available.

Abstract:
I show that the median earnings surprise has shifted rightward from small negative (miss analyst estimates by a small amount) to zero (meet analyst estimates exactly) to small positive (beat analyst estimates by a small amount) during the 16 years, 1984 to 1999. I show that a rightward temporal shift in median surprise from negative to positive describes earnings, but neither profits nor losses. Median profit surprise shifts within the positive quadrant, from zero to one cent per share. Median loss surprise shifts within the negative quadrant from extreme negative (about -33 cents per share) to zero. I show that the median surprise for profits exceeds that for losses in every year. I document significant positive temporal trends in both meet and beat analyst estimates for both profits and losses, but I find a greater frequency of profits that either meet or beat analyst estimates in every year. I find a significant positive temporal trend in positive profits that are 'a little bit of good news,' and a significant negative temporal trend in managers who report losses that are an 'extreme amount of bad news.' My results are robust to the four internal validity threats I consider - namely temporal changes in: (1) analyst forecast accuracy, (2) the mix of earnings of one sign preceded by earnings of another sign four quarters ago, (3) the timeliness of the most recent analyst forecast, and (4) the I/B/E/S definition of actual earnings. I find that managers of growth firms are relatively more likely than managers of value firms to report good news profits. I show that when they do report positive profit surprises, managers of growth firms are more likely to report 'a little bit of good news' in every year.

Earnings surprises, temporal analysis, profits versus losses, growth versus value firms

Abstract:
Using data from corporate acquisitions recorded under the purchase method, this research tests the reliability (representational faithfulness) of current cost disclosures. The fair value of property, plant, and equipment recorded by the acquiring company following the acquisition is found to be significantly related to the current cost disclosures made by the acquired company prior to the acquisition. When the data are segmented according to reporting regime, the significant relationship pertains to the SFAS 33 disclosures but not to ASR 190 disclosures of current cost. The study also finds that the results pertain primarily to current cost disclosures made shortly before the acquisition date. Overall, the results support current initiatives for increased departure from historical-cost approaches to accounting, especially if these measures are made along the lines of SFAS 33 techniques rather than ASR 190 techniques.

Corporate acquisitions, Current cost accounting, Testing

Abstract:
Dreman and Berry (1995) have offered a perspective on analyst earnings forecast errors and their implications for security analysis. Among other arguments, they contend that the errors are too large to be reliably used by investors, the forecasts are less accurate than forecasts by time-series models, the errors are increasing over time, the analysts' forecasts are too optimistic, and the investment community relies too heavily on analyst forecasts. An alternative perspective on these issues is offered. The argument is that analysts' forecast errors are within 3% of an appropriate benchmark (namely, stock price), that their forecasts generally are significantly more accurate than forecasts by naive or sophisticated time-series models, that analyst forecast errors have not been increasing over time, that analysts have been too pessimistic in recent years, and that the investment community, by placing too much weight on forecasts made by time-series models, relies too little on analysts' forecasts.

Abstract:
Determining familiarity with and evaluating quality of accounting journals are of interest to various parties in accounting academia. In recent years, the number of accounting journals has grown, and many special-interest subgroups have arisen. A study surveys senior faculty at Business Week's best 40 MBA programs to determine their familiarity with and quality perceptions of 44 accounting journals. As to familiarity, 5 journals were nearly universally known, and a total of 15 had wide recognition. Financial, managerial, and auditing faculty exhibited similar familiarity patterns, while tax faculty had a somewhat different pattern. As to quality perceptions, relatively few journals achieved high quality evaluations. There was, however, general consensus across the different subject area faculty as to the top journals. Special consideration was given to the new (post-1980) journals. Six of the 19 newer journals in the study achieved high familiarity scores, and 3 achieved high quality evaluations.

Abstract:
Surya Janakiraman, Suresh Radhakrishnan, and Rafal Szwejkowski (2007), hereafter JRS, examine the impact of regulation fair disclosure (RFD) on the number of days between analysts' first earnings forecasts for the quarter and the fiscal quarter-end (first-forecast horizon). JRS conclude that the first-forecast horizon decreased by twelve days post-RFD; it decreased for both analysts whose average annual first-forecast horizon put them in the top 25 percent for each firm (designated by JRS as leaders) and the bottom 25 percent for each firm (designated by JRS as followers); and it decreased about the same amount for both leaders and followers. JRS interpret their results as follows. RFD reduced the first-forecast horizon on average overall; it reduced the first-forecast horizon for both leaders and followers; and it did not eliminate the timing advantage of leaders versus followers. My discussion proceeds along the following lines. First, I examine whether RFD reduced the first-forecast horizon. Second, I examine whether RFD decreased the first-forecast horizon for both leaders and followers. Third, I examine whether RFD decreased the first-forecast horizon for leaders versus followers.

Abstract:
Abstract not available.

Abstract:
Previous research (e.g., O'Brien [1988], Stickel [1990], and Brown [1991]) has documented that timely composites of analysts' forecasts are superior to the mean forecast in terms of predictive ability. An alternative criterion in choosing an earnings expectation proxy is market association, whereby the forecast whose error is most highly correlated with abnormal returns is the proxy of choice (Foster [1977]). This paper shows that timely composites are superior to the mean on the market association dimension. The results are robust to the three timely composites considered by Brown [1991] and pertain to each of five years and two deflators.

Abstract:
No abstract available.

Abstract:
We formulate and test the hypothesis that nonearnings disclosures of small, but not large, firms generally are good news. Nonearnings disclosures are defined as disclosures by managers and outsiders about news other than earnings (e.g., stock splits, takeovers, new orders). Good news is defined as a positive stock pi-ice reaction at the time of the information disclosure. Our hypothesis is motivated by two lines of prior research. First, managers have incentives to disclose their private information voluntarily when they expect the effects of the information on firm value to exceed the disclosure costs (Verrecchia 19831. Second, the firm-size differential information hypothesis, advanced by Atiase (1980, 1985) and the corroborating empirical evidence of Atiase (1985, 1987), Freeman (1987), and Bhushan (1989) suggest that incentives for information production and dissemination by outsiders are an increasing function of firm size. Thus, assuming that nonearnings disclosures concerning small firms are initiated primarily by managers, whereas those of large firms are not, small (but not large) firms' nonearnings disclosures are more likely to be good rather than bad news. Using firm-specific nonearnings disclosures, identified from the Dow Jones News Retrieval Service data base over the 1982 to 1987 period, we show that small firms' nonearnings disclosures, on average, are associated with significant stock price increases, whereas large firms' nonearnings disclosures, on average, are valuation-neutral.

Given these results and the evidence that nonearnings disclosures are often made around the time of earnings announcements (Hoskin et al.1986; Thompson et al. 1987), we reexamine the puzzling result of Chari et al. (1988) that on-time earnings announcements of small, but not large, firms are associated with positive abnormal returns, unconditional upon the nature of the earnings news. We hypothesize that this phenomenon is attributable to nonearnings disclosures of good news around the time of small firms' earnings announcements. We show that small and large firms' pure on-time earnings announcements are not associated with positive abnormal returns, and that small (but not large) firms' contaminated on-time earnings announcements are associated with positive abnormal returns. We conclude that the Chari et al. (1988) results do not pertain to small firms' on-time earnings announcements per se, but to those that are accompanied by nonearnings news.

Small firms, Earnings announcements, Nonearnings disclosures, Good news

Abstract:
This paper reports of a survey of US doctoral-grantiing programs in accounting (with 95 percent of the programs rsponding). The data bases most commonly possessed by accounting doctoral programs are identified, personal support is discussed, the amount of direct annual costs needed to maintain these data bases.are provided. Our findings have implications for accounting educators in their roles as researchers, as teachers of doctoral students, as advisors to under-graduate and masters students, and as teachers of non-doctoral students. Our findings should also be useful for administrators and faculty groups who are evaluating a current accounting doctoral program or propose to begin a new doctoral program.

Abstract:
Foreknowledge of earnings surprises is more valuable than trading on known earnings surprises. Earnings surprises are predictable to a considerable extent. I evaluate the performance of an earnings surprise predictor (ESP), which foretells how close analyst expectations of quarterly earnings numbers will be to upcoming earnings numbers. I examine performance over nine years, adjust returns for those of the S&P 500 index, and I adopt an implementable trading strategy. I show that ESP outperforms the S&P 500 index in all nine years. I also show that a weighted portfolio assigning higher weights to stocks expected to have the largest positive earnings surprises has a higher return and a lower variance than a portfolio that assigns equal weights to all rank groups.

Abstract:
There is considerable evidence suggesting that stock election based on firms' anticipated earnings can generate excess returns. The earnings predictor model (EPM) introduced in this article uses individual analyst forecasts to generate an earnings forecast that is more accurate than the consensus in over 1,200 (non-independent) back tests using three alternative metrics. The model determines those firm-specific components that can best generate superior earnings forecasts for each company at each point in time. The EPM is shown to have been very effective for stock selection purposes, generating a total annualized Q1 minus annualized Q5 return differential of 15.57% over the period of the study.

Abstract:
This paper evaluates the research contributions of Accounting, Organizations and Society (AOS) during the years 1976-1984. We begin by investigating whether AOS has achieved its research objectives as defined by its "aims and scope". We then examine two major attributes of AOS articles, the foundation disciplines they draw upon and the research methods they employ. Next we use citation analysis to determine the impact AOS's research has had upon research published in the social sciences. Finally, we identify those AOS articles which have exerted the greatest impact on the social sciences.

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Abstract:
No abstract available.

Abstract:
This paper describes and analyzes four attribute dimensions that have impacted contemporary accounting literature (CAL) between 1976 and 1984, and develops a model that predicts attribute levels in 1985 and 1986. The attribute dimensions studied are: accounting area, research method, school of thought, and geographical focus. Publication counts and citation analyses are performed on a data set of 1,110 accounting articles. The results suggest that linear trends exist over time in the publication and citation measures of selected attributes of accounting papers; that new or emerging attribute areas are more likely to be influential than are papers published in established areas; and that it is easier to predict the relative influence of publications that will exhibit certain attributes than it is to predict the number of papers that will be published with these attributes.

Abstract:
No abstract available.

Abstract:
This paper empirically examines whether labor strikes affect the forecasting and information content of quarterly earnings numbers. We address two issues regarding financial analyst forecast (FAF) superiority: whether FAF superiority increases when a strike occurs and if so, whether the increase in FAF superiority is sustained immediately after the strike ends. We also examine two issues regarding information content: whether strikes affect the coefficient mapping unexpected earnings into stock prices and whether strikes affect the variance of stock price changes. We suggest that strikes affect both the forecasting and information content of quarterly earnings numbers.

Abstract:
Abstract not available.

Abstract:
Little is known about which forecasts to select when all forecasts are not equally recent. This paper uses security analysts' annual earnings forecasts to examine this issue. The comparative predictive accuracy of the mean and three timely composites is examined, where the three timely composites are the most recent forecast, the average of the three most recent forecasts, and the 30-day average. The mean is shown to be less accurate than all three timely composites, and the 30-day average is shown to be the most accurate timely composite. The findings suggest that tradeoffs exist between recency and aggregation, and that these tradeoffs are related to firm size.

Abstract:
Managers play earnings surprise games to avoid negative earnings surprises by managing earnings upward or by managing analysts' earnings expectations downward. We investigate the effectiveness of the financial reporting process at restraining earnings surprise games. Because the annual reporting process is subject to an independent audit and more rigorous expense recognition rules than interim reporting, it provides managers with fewer opportunities to manage earnings upward. We document that, relative to interim reporting, annual reporting reduces the likelihood of income-increasing earnings management and, to a lesser extent, of negative surprise avoidance, but increases the magnitude of downward expectations management. Our findings suggest that regulatory attempts to monitor corporations' internal checks and balances are likely to be more effective at curbing upward earnings management than at mitigating negative surprise avoidance.

Abstract:
The Financial Accounting Standards Board (FASB) follows an elaborate due-process procedure when it sets accounting standards. Surprisingly, little is known regarding what role submissions before the FASB play in the FASB's decision making process. This study examines one set of FASB decisions, changes between its 1974 and 1978 Exposure Drafts on price-level accounting, and relates it to firm specific characteristics suggested by economic theory. The model suggests that a corporation's influence on the FASB is positively related to its resources, the number of diverse constituencies it represents, and its previous success at influencing regulators. Proxies for theses factors are the firm's 1974 net sales, the number of lines of business it disclosed in its 1974 10-K reports, and its 1974 tax subsidy, respectively. The resources and the number of lines of business variables are found to be significant determinants of corporate influence. The results suggest that corporations do influence FASB decision making, and that some corporations are more influential than others.

FASB, Lobbying, Influence, Regulation

Abstract:
No abstract available.

Abstract:
No abstract available.

Abstract:
The state of the art in the analyst forecasting literature is that analyst earnings forecast ability is only firm-specific (Chen, Francis, and Jiang (2005); Chen and Jiang (2006)). This view is based on Park and Stice’s (2000) finding of the absence of a “spillover” effect, i.e., investors do not consider an analyst’s earnings forecast ability regarding firm k when reacting to his earnings forecast revision for firm j. We re-examine the issue of whether or not earnings forecast ability is only firm-specific by introducing a broad measure of general ability defined as earnings forecast ability for all other firms the analyst follows. We show that a broad measure of general ability is incremental to firm-specific ability both for explaining earnings forecast accuracy in holdout periods and investor reactions to earnings forecast revisions. Our findings suggest that earnings forecast ability has a general aspect incremental to its firm-specific aspect.

financial analysts, firm-specific forecast ability, general forecast ability, earnings forecast revisions, market reaction

Abstract:
The study examined analyst forecasts of 26 macroeconomic statistics for August 1998 through March 2007. The four research questions were, (1) Does forecast accuracy persist? (2) What are the determinants of such persistence? (3) Do analysts who exhibit these characteristics make more accurate forecasts than the simple consensus? (4) Is a smart consensus that is based on individuals exhibiting these characteristics more accurate than the simple consensus? It was shown that analyst forecast accuracy persists and is determined by long-term past accuracy and the analyst's overall ability in forecasting all statistics.

Economics, Macroeconomics, Equity Investments, Research Sources