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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 (occuring 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.
Journal of Accounting and Economics. 02/1987;
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ABSTRACT: This paper utilizes probit analysis to determine if size, risk, capital intensity, concentration, and the existence of incentive compensation plans affect the choice of accounting principles. The results indicate that they do but not on a consistent basis.
Journal of Accounting and Economics.
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ABSTRACT: This paper is designed to provide additional evidence on the positive theory of accounting policy choice by combining individual accounting principles into firm income strategies. These strategies were the dependent variable in a probit analysis where the independent variables were size, management compensation, industry concentration ratio, systematic risk, capital intensity and the total debt to total asset ratio. The results indicate that four of these factors (size, management compensation, concentration ratio, and the total debt to total asset ratio) have a significant association with the choice of a firm's income strategy. This test provides strong evidence consistent with the positive theory of accounting standard setting/choice. We also present evidence that smaller firms and/or firms in less concentrated industries do not appear to make accounting policy choice decisions that are consistent with this theory.
Journal of Accounting and Economics.
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ABSTRACT: This paper provides evidence of security analyst (SA) superiority relative to univariate time-series (TS) models in predicting firms' quarterly earnings numbers and shows that SA forecast superiority in our sample is attributable to: (1) better utilization of information existing 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.
Journal of Accounting and Economics.
