Two Essays In Financial Accounting
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Two Essays In Financial Accounting
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Author : Dorothy Alexander-Smith
language : en
Publisher:
Release Date : 2011
Two Essays In Financial Accounting written by Dorothy Alexander-Smith and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Business forecasting categories.
Essay 1: The Association of Earnings Quality with Financial Analysts' Earnings Forecast Attributes. This study investigates the association between firms' earnings quality and analysts' forecast errors and dispersion. The findings suggest that the quality of earnings is inversely related to analysts' forecast errors but is not associated with forecast dispersion. These results are better understood by an examination of the relationship of forecast error and dispersion with the major sub-components of earnings quality- the quality of the innate accrual component (quality of accruals related to the complexity of the firm's operations) and the quality of the discretionary accrual component (quality of managements' judgment as reflected in accruals used to project future performance). The inverse association between earnings quality and forecast error is driven primarily by the quality of the firm's innate accrual component (InnAQ). As firm complexity and variability increase, earnings contain larger amounts of management judgment and estimation. The larger amount of management estimation included in earnings renders it relatively less reliable and thus forecasting difficulty (reflected in greater forecast errors and dispersion) is amplified for poorer InnAQ. This inverse association is the dominant effect in earnings quality's association with analysts' forecast errors. The quality of firms' discretionary accrual components depends upon whether managers use of their discretion to provide value relevant information, or whether they use the discretionary component to incorporate manipulative and noisy discretionary accruals. In a regression of the of firms' discretionary earnings components on forecast dispersion I find an inverse relationship between the magnitude of the firm's discretionary earnings component and analysts' forecast dispersion. This is consistent with managers using the discretionary component to provide information on firm performance, thus facilitating more precision in analysts' forecasts. This essay contributes to two controversial areas of accounting research. The study indirectly provides evidence supporting managers' (on average) use of their discretion to provide value relevant information in earnings; and it simultaneously demonstrates analysts' expertise in incorporating information related to EQ and its sub components into their forecasts. Essay 2: The Influence of Earnings Quality on Financial Analysts' Herding Behavior. Essay 2 investigates how firms' EQ and its innate (the quality of accruals related to the complexity of the firm's operations) and discretionary (the quality of accruals based on managements' discretion) sub-components affect analysts' motivation to issue herding forecasts. Herding forecasts are forecasts which mimic those issued by other analysts and ignore the analyst's own private information. Although theoretical studies have linked herding behavior to analysts' rational reputational concerns, herding reduces the information available to investors in the market and hence negatively impacts market efficiency. Conversely, bold forecasts, forecasts issued which move away from the consensus (linked in prior studies to greater private information release and higher accuracy) are likely to contribute to improved market efficiency. As capital market intermediaries, financial analysts are charged with facilitating investors' investment decisions. The literature documents that poor earnings quality reduces investors' ability to evaluate firm performance. This essay contributes to the literature by providing evidence on how financial analysts' herding behavior is influenced by EQ and its sub components. Results show that the quality of the firm's innate accrual component is the major driver of analysts' bold forecasting. The negative association between forecast boldness and firms' innate accrual quality indicates that analysts issue bolder forecasts when investors have more difficulty determining firm value (noisier signal from innate accrual component). Given the prior literature finds that bolder forecasts contain more private information and are more accurate, the results suggests that analysts are effectively performing their market intermediary function. The lack of a significant association between bold forecasting and the discretionary earnings component is in line with prior literature's documentation of analysts' poor utilization of the discretionary information in their forecasts. However, this study's evidence of a positive association between bold forecasts and analysts' firm specific experience implies that analysts with more firm specific experience have a greater understanding of managers' discretionary signals and exploit their advantage by issuing bolder forecasts. Results show a negative association between firms' overall EQ and analysts' forecast boldness implying that analysts herd more the higher the firm's EQ. This finding underscores the importance of reputational concerns and the demand for analysts' investment advice for analysts' herding behavior.
Essays In Financial Accounting
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Author : Yifang Xie (Professor of accounting)
language : en
Publisher:
Release Date : 2020
Essays In Financial Accounting written by Yifang Xie (Professor of accounting) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with Electronic dissertations categories.
This dissertation is comprised of two empirical essays that examine how different economic forces impact the collection and processing of information. The first essay is motivated by a disclosure theory that suggests a negative impact of disclosure regulation on managers' information acquisition. When the regulator requires a disclosure of unfavorable information, firm managers might reduce information collection to avoid the mandatory disclosure (e. g. , Matthews and Postlewaite 1985; Shavell 1994; Polinsky and Shavell 2010). This theory lacks empirical evidence due to the difficulty in measuring managers' information collection behaviors. I overcome this challenge by investigating a 2007 regulation change that requires pharmaceutical firms to disclose newly found safety problems on their product labels. Using a difference-in-difference research design, I find that firms collect less new safety information in the post-regulation period. My study highlights one unintended negative consequence of disclosure regulation: mandatory disclosure might reduce managers' information production. The second essay is joint work with Zachary Kaplan and Xiumn Martin. We examine whether firm managers selectively convey information to Thomson Reuters I/B/E/S, to influence the generating process of the EPS consensus. We find that short-horizon optimistic forecasts are more likely to be removed from the I/B/E/S consensus calculation, after controlling for removal policies that I/B/E/S developed. This higher likelihood of removing optimistic forecasts is more pronounced when (i) the removals allows managers to meet or beat the I/B/E/S consensus, (ii) when managers have greater ability to influence I/B/E/S, and (iii) when costs of alternative options to achieve the meet-or-beat objective are higher. We also find that discretionary removals improve consensus accuracy, suggesting that I/B/E/S benefits from accepting the influence of firm managers. Collectively, our findings challenge the conventional view that I/B/E/S mechanically aggregates EPS forecasts from Wall Street analysts, and also yield insights into I/B/E/S's information production process.
Essays In Financial Accounting
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Author : Tao Jiao
language : en
Publisher:
Release Date : 2009
Essays In Financial Accounting written by Tao Jiao and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
This dissertation aims to contribute to the literature about the quality of accounting information by investigating its interaction with institutional factors (i.e., their external environment) in which firms operate, such as industry and stock exchange. The research topics of this dissertation include the motivation of earnings management (chapter 2), the consequence of accounting frauds on the failure rate of IPO firms (chapter 3) and the effectiveness of actions taken by standard setters to improve the quality of accounting information (Chapter 4). Chapter 2 focuses on firms’ industry environment and investigates whether industry valuation impacts management's decision to manage earnings. Chapter 3 has been devoted to examine the consequence of large scale earnings management or accounting scandals on the firm's external environment. Chapter 4 examines whether the uniform adoption of IFRS by EU countries in 2005 improves the quality of accounting information by investigating the changes in the quality of analyst forecasts.
Two Essays On Information And Control Issues In Accounting
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Author : Xiaoli Rao
language : en
Publisher:
Release Date : 2017-01-27
Two Essays On Information And Control Issues In Accounting written by Xiaoli Rao and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-01-27 with categories.
This dissertation, "Two Essays on Information and Control Issues in Accounting?" by Xiaoli, Rao, 饒曉莉, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: Abstract of the thesis entitled Two Essays on Information and Control Issues in Accounting Submitted By Rao Xiaoli for the Degree of Master of Philosophy at The University of Hong Kong in October 2003 Abstract This thesis consists of two essays: 1. Has Earnings Information Become Less Useful for Financial Analysts and Investors? 2. Consequences of Group Affiliation: Evidence from Financial Statement and Stock Market -An Analysis of Hong Kong Business Groups. The first study investigates whether the usefulness of earnings information has changed in the last two decades, in the eyes of both analysts and investors, using data from U.S. firms. Contrary to assertions made by other studies, I find no consistent evidence that the earnings have lost its value relevance over time. My result shows that there is a significant increase in the analysts' earnings response coefficient, implying that analysts place more trust on earnings information than before. I also examine four factors (i.e., size, industry, earnings and stability) that are likely to contribute to changes in the EPS over time. It seems that both analysts' ERC and investors' ERC are higher for high- technology firms than for other firms. This is contrary to the argument that for firms with iilarge amounts of unrecorded intangibles, financial accounting information is of limited value. I find that the earnings of larger firms are more trusted by analysts than the earnings of small firms. Moreover, for analysts' ERC study, I also consider the possibility that analysts under-react to information (accounting and non-accounting) received during the year. My results show that analysts' consensus forecast revisions (in the year-end, upon receiving of earnings information) are positively correlated with the revision of forecasts during the year (before receiving earnings information), suggesting the existence of under-reaction. However, it does not alter my conclusion that analysts trust more on earnings information throughout the years. The second study examines whether affiliation with business groups is beneficial for firms. Firms affiliated with business groups can benefit from access to some internal institutions to mitigate external market failure. However, group affiliation may also involve the cost of tunneling, which could lead to inferior performance for lower-level firms within a group. I analyze the accounting and stock market performance of HK listed firms, and find that group affiliation is on average beneficial for HK listed firms, especially those affiliated with standard groups. Firms affiliated with business groups are better at efficiently using total assets to generate profit, and they have higher profit margins, suggesting that they are better at cost control. The results also indicate that firms affiliated with business groups are valued more in the stock market. My evidence does not consistently support the existence of tunneling behavior in the Hong Kong stock market. iii DOI: 10.5353/th_b2929484 Subjects: Corporate profits - Accounting Corporate profits - China - Hong Kong - Accounting
Two Essays On Shareholder Litigation And Financial Accounting Studies
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Author : Zhiyang Li
language : en
Publisher:
Release Date : 2016
Two Essays On Shareholder Litigation And Financial Accounting Studies written by Zhiyang Li and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with Corporations categories.
Two Essays On Financial Reporting Quality
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Author : Yangxin Yu
language : en
Publisher:
Release Date : 2011
Two Essays On Financial Reporting Quality written by Yangxin Yu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Auditing categories.
Financial Accounting And Equity Markets
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Author : Philip Ronald Brown
language : en
Publisher:
Release Date : 2013
Financial Accounting And Equity Markets written by Philip Ronald Brown and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with Accounting categories.
Philip Brown is one of the most admired and respected accounting academics alive today. He was a pioneer in capital markets research in accounting, and his 1968 article, co-authored with Ray Ball, "An Empirical Evaluation of Accounting Income Numbers," arguably had a greater impact on the course of accounting research, directly and indirectly, than any other article during the second half of the twentieth century. Since that time, his innovative research has focused on issues that bridge accounting and finance, including the relationships between net profit reports and the stock market, the long-run performance of acquiring firms, statutory sanctions and voluntary corporate disclosure, and the politics and future of national accounting standards to name a few. This volume brings together the greatest hits of Brown's career, including several articles that were published in out-of-the-way places, for easier use by students and researchers in the field. With a foreword written by Stephen A. Zeff, and an introduction that discusses the evolution of Brown's research interests and explains the context for each of the essays included in the volume, this book offers the reader a unique look inside this remarkable 50-year career.
Two Essays In Finance
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Author : Ward R. Kangas
language : en
Publisher: Universal-Publishers
Release Date : 1997-10
Two Essays In Finance written by Ward R. Kangas and has been published by Universal-Publishers this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-10 with Business & Economics categories.
Based on data on publicly traded insurance firms, the first essay examines questions about the effect of large catastrophic events on insurance firms. Rather than looking at a single event, thirty catastrophic events were aggregated into quintiles and the cumulative abnormal returns around these events were found to be significantly positive over a 25 day trading window. There is no significant evidence that post-catastrophic stock returns are correlated to the magnitude of the catastrophe. The second essay analyzes the effect of a large land grant university, the University of Illinois, on the State Treasury of Illinois. If the State Treasury were acting as its own agent trying to maximize revenues, would it choose higher education as an investment versus other alternative investments. While it is true the State makes large expenditures for the operations of the University, it is also true that individuals receiving degrees on average receive higher incomes. Taxes or higher incomes offset the cost of operating the University. The study is broken out by the level of student: undergraduate, masters, doctorate, medical professional, and by function of the University. It was found that all levels of education have a positive return not only for the individual, but also for the State Treasury. This is in excess of any non-pecuniary benefits to the State of having a better educated population, or the local taxation effects on the county or city where the campus is located. These returns are found to be higher than other types of investments.
Financial Accounting And Equity Markets
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Author : Philip Brown
language : en
Publisher: Routledge
Release Date : 2013-06-19
Financial Accounting And Equity Markets written by Philip Brown and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-06-19 with Business & Economics categories.
Philip Brown is one of the most admired and respected accounting academics alive today. He was a pioneer in capital markets research in accounting, and his 1968 article, co-authored with Ray Ball, "An Empirical Evaluation of Accounting Income Numbers," arguably had a greater impact on the course of accounting research, directly and indirectly, than any other article during the second half of the twentieth century. Since that time, his innovative research has focused on issues that bridge accounting and finance, including the relationships between net profit reports and the stock market, the long-run performance of acquiring firms, statutory sanctions and voluntary corporate disclosure, and the politics and future of national accounting standards to name a few. This volume brings together the greatest hits of Brown’s career, including several articles that were published in out-of-the-way places, for easier use by students and researchers in the field. With a foreword written by Stephen A. Zeff, and an introduction that discusses the evolution of Brown’s research interests and explains the context for each of the essays included in the volume, this book offers the reader a unique look inside this remarkable 50-year career.
Essays On Financial Reporting Quality
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Author : Yuequan Wang
language : en
Publisher:
Release Date : 2012
Essays On Financial Reporting Quality written by Yuequan Wang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with Corporation reports categories.
Because of the importance of financial reporting quality in capital market, I explore the determinants to financial reporting quality in my second essay, "Market power and accrual management". I examine whether a firm's competition status in product markets affects its financial reporting quality, measured as discretionary accrual. I argue that because firms with greater market power have a greater ability to set prices for their products, they have comparatively fewer incentives to manipulate earnings through accrual management. I use the Lerner index to measure product market power and asset-deflated absolute discretionary accruals to proxy the magnitude of accrual management. Using a large sample of firm-year observations from 1997 to 2007, I find that, as hypothesized, firms with greater market power tend to have lower levels of accrual management. The final essay, "Product market competition and audit fees", goes one-step further than the second. As noted in the second essay, product market competition affects a firm's financial reporting quality. However, financial reporting quality may not be the only factor auditors take into account when they decide what fees to charge a client. The last essay, therefore, empirically explores the inter- and intra- industry effect of product market competition on audit fees. Prior literature posits two contradictory predictions on the relation between product market competition and audit fees. On the one hand, firms in a competitive market are expected to face higher liquidity risk, distress risk, and liquidation risk, thus increasing auditors' assessments of a client's business risk. So, audit fees are expected to increase with industry competitiveness. On the other hand, it is often argued in prior literature that product market competition decreases information asymmetry and mitigates agency problems between shareholders and managers and increases the accuracy of financial reporting, thus decreasing auditors' assessments of a client's audit risk resulting in necessary audits. So auditors tend to charge lower fees on firms in a more competitive industry. The study, then, empirically tests the relation between product market competition and audit fees and finds that auditors charge higher fees on firms in a more competitive industry. It also finds that auditors charge lower fees on firms with greater market power within the same industry.