Accounting Adjustments and the Valuation of Financial Statement Note Information in 10-K Filings

46 Pages Posted: 7 Mar 2011

See all articles by Gus De Franco

Gus De Franco

Purdue University

M.H. Franco Wong

University of Toronto - Rotman School of Management

Yibin Zhou

University of Texas at Dallas - Naveen Jindal School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: March 4, 2011

Abstract

We examine the valuation of financial statement note information at the time of 10-K filings. We find that stock returns around 10-K filings are positively related to accounting adjustments calculated from financial statement note information. We further document that the likelihood of equity analysts issuing a report and updating their target price estimates at the 10-K dates is increasing in the magnitude of the adjustments. Those analysts who do update their target prices at this time revise their estimates consistent with the sign and magnitude of the adjustments. These findings are consistent with financial statement users utilizing financial statement note information to make accounting adjustments, thereby incorporating this information into stock prices.

Keywords: Accounting adjustments, financial statement note, 10-K filings, equity analysts, target price estimates

JEL Classification: G14, G29, M40, M41, M44

Suggested Citation

De Franco, Gus and Wong, M.H. Franco and Zhou, Yibin, Accounting Adjustments and the Valuation of Financial Statement Note Information in 10-K Filings (March 4, 2011). Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1777240

Gus De Franco

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

M.H. Franco Wong (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-0729 (Phone)

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Wong.aspx

Yibin Zhou

University of Texas at Dallas - Naveen Jindal School of Management ( email )

2601 N. Floyd Road
Richardson, TX 75080
United States

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