Katherine Schipper

Katherine Schipper
Duke University | DU · Fuqua School of Business

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92
Publications
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Introduction
Skills and Expertise

Publications

Publications (92)
Article
We analyze the disposition of auditor‐proposed adjustments to financial statements. Our analyses address concerns, expressed by regulators and others, that auditors and their clients fixate on quantitative thresholds and overlook qualitative factors in assessing the materiality of discovered misstatements. Using a large sample of PCAOB‐inspected au...
Article
We provide large-sample archival evidence on the nature and consequences of errors deemed immaterial to the previously issued financial statements containing the errors (immaterial errors). The incidence of immaterial error corrections has been increasing since about 2004, and these corrections are associated with modestly and discernibly negative...
Article
Full-text available
This paper investigates how data requirements often encountered in archival accounting research can produce a data-restricted sample that is a non-random selection of observations from the reference sample to which the researcher wishes to generalize results. We illustrate the effects of non-random sampling on results of association tests in a sett...
Article
We develop a conceptually grounded approach, based on the International Accounting Standards Board’s conceptual framework, to the accounting for the rights and obligations embodied in a cap-and-trade program. Under this approach, firms recognize allowances as intangible assets, initially measured at fair value with a credit to cash for purchased al...
Article
We analyze data made available through the PCAOB (Public Company Accounting Oversight Board) to provide descriptive evidence on the properties of auditors’ actual quantitative materiality judgments and the implications of those judgments for financial reporting. Auditors’ quantitative materiality judgments do not appear to result simply from applyi...
Article
en We study managers’ interventions in financial reporting by examining working capital deficits, measured as current ratios less than 1.0. Current ratios represent important balance sheet liquidity indicators to lenders and creditors, and have an identifiable and naturally occurring reference point at 1.0, analogous to the profit/loss income state...
Article
We examine uniform and discretionary regimes for reporting information about firm performance from the perspective of a standard setter, in a setting where the precision of reported information is difficult to verify and the reported information can help coordinate decisions by users of the information. The standard setter's task is to choose a rep...
Article
Full-text available
We offer some thoughts on the relation between theoretical and empirical accounting research in the context of causal inference, in response to two questions posed by Professor Ivan Marinovic, organizer of the 2014 Stanford University Graduate School of Business Causality conference. The two questions are: should causal inference be the objective o...
Article
We discuss three research design choices made by Mohanram (2013) and Radhakrishnan and Wu (2013) in their examinations of the link between cash flow forecasts and declines in returns to a trading strategy based on past realized accruals (the accruals anomaly). The first choice is the use of pooled estimation combined with an indicator for the incid...
Article
IPO firms' information precision is not only generally low, but also likely to be initially estimated with considerable error due to a lack of an information history. I find that the deviation between expected and realized information precision is predictably associated with the magnitude and the persistence of long-run abnormal returns after an IP...
Article
We examine how the criteria for choosing estimation samples affect the ability to detect discretionary accruals, using several variants of the Jones (1991) model. Researchers commonly estimate accruals models in cross-section, and define the estimation sample as all firms in the same industry. We examine whether firm size performs at least as well...
Article
The average cash holdings of Chinese-listed firms decreased significantly after the split share structure reform in China, which specified a process that allowed previously nontradable shares held by controlling shareholders to be freely tradable on the exchanges. The reduction in cash holdings is greater for firms with weaker governance and firms...
Article
We provide evidence that disclosed items are not processed differently from recognized items when the disclosures are salient, not based on management estimates, and amenable to simple techniques for imputing as-if recognized amounts. For a sample of firms with both capital and operating leases, we find that as-if recognized amounts for leases are...
Article
We discuss how basing financial reporting on an entity's business model is, in effect, basing financial reporting on management's intent with respect to the use, transfer or other disposition of an asset or liability. We provide several examples of existing International Financial Reporting Standards and US Generally Accepted Accounting Principles...
Article
We examine the incidence of managerial intervention to avoid reporting working capital deficits, measured as current ratios less than 1.0 (that is, we take current liabilities as the reference point for current assets). We find that distributions of quarterly reported current ratios exhibit a severe discontinuity at 1.0, that the discontinuity incr...
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Full-text available
At the peak of the financial crisis in October 2008, the IASB was put under strong political pressure and allowed financial companies to suspend fair value accounting for selected finan-cial assets. Using a comprehensive global sample of publicly listed IFRS banks, we examine the economic consequences of this amendment to IAS 39. Our results sugges...
Article
We analyze the ability of earnings and non-earnings performance metrics to explain the variability in annual stock returns for industries where we identify, ex ante, an allegedly preferred (for valuation purposes) summary performance metric. We identify three industries where earnings before interest, taxes, depreciation, and amortization (EBITDA)...
Article
This paper first describes the components of a conventional cost‐benefit analysis, a decision tool that is widely used to evaluate large public‐sector projects such as dams. It then compares a conventional cost‐benefit analysis to the approaches used by financial reporting standard‐setters and others to evaluate the costs and benefits of changes in...
Article
We examine the market reactions to firms' voluntary announcements of emissions reductions plans, unconditional and conditional on whether the firm has joined one or more of four voluntary commitment mechanisms whose goal is the reduction of greenhouse gas emissions in the United States. Our aim is to shed light on whether, and to what extent, these...
Article
Religion has been shown to influence economic choices and outcomes in a variety of contexts. We examine the relation between religion and accrual choices and hypothesize that religious social norms will curb optimism in accruals. Using the level of religious adherence in the county of a firm"s headquarter as a proxy for religious social norms, we f...
Article
Although sell-side analysts privately forecast revenues and expenses when producing earnings forecasts, not all analysts choose to provide I/B/E/S with earnings forecasts disaggregated into revenues and expenses. We investigate the role of reputation in explaining this decision. We find that analysts without established reputations are more likely...
Article
This commentary summarizes the materials presented and some of the discussion at the November 2007 AAA/FASB Financial Reporting Issues Conference. The topic of the conference was revenue recognition, and the IASB/FASB were considering two new models: the customer consideration model and the measurement model. This commentary provides some backgroun...
Article
Full-text available
Capital-markets based accounting research in China has a relatively short history; the two principal stock exchanges in Shanghai and Shenzhen have operated for less than 20 years. Recent accounting research has tended to adopt techniques, research designs and even topics that were developed in North America and
Article
This discussion raises issues concerning financial reporting transparency. We first observe that transparency is not well-defined in a financial reporting context. Extrapolating from the ways transparency is used in other contexts, we define financial reporting transparency as the extent to which financial reports reveal an entity's underlying econ...
Article
We examine whether rational investor responses to information uncertainty (IU) explain properties of and returns to the post-earnings-announcement-drift (PEAD) trading anomaly. Consistent with a rational learning explanation, we find that: (1) unexpected earnings (UE) signals that are characterized as having greater IU have more muted initial marke...
Article
A large number and cross-section of firms undertake financial asset transfers. The Financial Accounting Standards Board and the International Accounting Standards Board have been grappling with the appropriate accounting for financial asset transfers, especially with respect to derecognition-that is, when the assets should be removed from the trans...
Article
Using path analysis, we investigate the direct and indirect links between three measures of earnings quality and the cost of equity. Our investigation is motivated by analytical models that specify both a direct link and an indirect link that is mediated by information asymmetry, but do not suggest which link would be more important empirically. We...
Article
We examine the properties of a returns-based representation of earnings quality, estimated from firm-specific asset-pricing regressions augmented by an earnings quality mimicking factor. The coefficient on the earnings quality factor (the "e-loading") captures the sensitivity of the firm's returns to earnings quality in a given year or quarter, ana...
Article
This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting....
Article
We contrast the informativeness of earnings and dividends for firms with dual class and single class ownership structures. Results of both across-sample tests (which explicitly control for factors influencing ownership structure and informativeness) and within-sample tests (which implicitly control for factors associated with ownership structure) s...
Article
We investigate whether investors price accruals quality, our proxy for the information risk associated with earnings. Measuring accruals quality (AQ) as the standard deviation of residuals from regressions relating current accruals to cash flows, we find that poorer AQ is associated with larger costs of debt and equity. This result is consistent ac...
Article
This paper describes several implementation effects associated with the mandated adoption of international financial reporting standards promulgated by the International Accounting Standards Board in the European Union, including a possible increased demand for detailed implementation guidance and for a single European securities regulator. The pap...
Article
We examine the relation between the cost of equity capital and seven attributes of earnings: accrual quality, persistence, predictability, smoothness, value relevance, timeliness, and conservatism. We characterize the first four attributes as accounting-based because they are typically measured using accounting information only. We characterize the...
Article
We examine the relation between the cost of equity capital and seven attributes of earnings: quality, persistence, predictability, smoothness, value relevance, timeliness and conservatism. We refer to the first four attributes as accounting-based because measures of these constructs are typically based on accounting information only. We refer to th...
Article
We examine whether pricing effects associated with three earnings patterns (increasing annual earnings, quarterly earnings that consistently meet or exceed analyst forecasts, and smooth earnings) are related to each other and, separately, to the quality of the underlying earnings. We identify distinctly-priced incremental elements of increasing ear...
Article
We examine whether rational investor responses to information uncertainty explain properties of and returns to accounting-based trading anomalies. We proxy for information uncertainty with two measures of earnings quality: the standard deviation of the residuals from a Dechow and Dichev [2002] model relating accruals to cash flows, and the absolute...
Article
This paper proposes a framework to assess the effects of abnormal and normal accruals on the valuation relevance of earnings and cash flows. We use this framework to investigate the relative weights placed by investors on earnings and cash flows, as a function of estimated normal and abnormal accruals. Assuming that the construct capitalised by inv...
Article
We provide large sample evidence on whether the equity and debt markets impound information about the quality of earnings. We examine eight proxies for earnings quality (four based on the modified Jones approach to estimating abnormal accruals; three based on the Dechow and Dichev [2002] approach which relates working capital accruals to cash flows...
Article
We investigate whether competing information, primarily analyst reports, reduces the usefulness of earnings announcements. Inconsistent with the view that information in analyst reports substitutes for earnings announcements, we find a positive relation between absolute abnormal returns to the two types of disclosures. This positive relation also c...
Article
We investigate three explanations for prior studies' finding that the usefulness of earnings announcements, as measured by their absolute market responses, has increased over time. We confirm this increase for a sample of 426 relatively large, stable firms over 1980-1999. We find no evidence that this over-time increase in the magnitude of the mark...
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Full-text available
This manuscript responds to the request for comment on the SEC Concepts Release
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We document post-event negative abnormal returns to the (implicit) sell recommendations of a group of fundamental analysts. We also find statistically significant deterioration in the financial performance of the identified firms in the year after the recommendations. Together the results are consistent with the claim of fundamental analysts that t...
Article
The Financial Accounting Standards Committee of the American Accounting Association (hereinafter, the Committee) is charged with responding to requests for input from standard setters on issues related to financial reporting. The Committee is pleased to respond to the invitation to comment on the Special Report of the G4+1 (hereinafter, the "Group"...
Article
This paper discusses certain implications of capital-markets-based academic accounting research for the assessment of International Accounting Standards (IAS) by the U.S. Securities Exchange Commission (SEC). The SECs assessment criteria are comprehensiveness, high quality (comparability, transparency and full disclosure) and rigorous interpretatio...
Article
The Financial Accounting Standards Committee of the American Accounting Association (the Committee) is charged with responding to requests for input from standard setters on issues related to financial reporting. The Committee is pleased to respond to the FASB's invitation to comment on the Position Paper, "Methods of Accounting for Business Combin...
Article
This paper estimates the magnitude of tax costs and their impact on the decision to divest assets via a taxable sale rather than a tax-free spin-off. We find that the tax costs are substantial, averaging 8% of market value of the divested assets, and that cross-sectional variation in tax costs has a large impact on managers’ choice of divestiture m...
Article
Recent studies argue that the spread-adjusted Taylor rule (STR), which includes a response to the credit spread, replicates monetary policy in the United State. We show (1) STR is a theoretically optimal monetary policy under heterogeneous loan interest rate contracts in both discretionay and commitment monetary policies, (2) however, the optimal r...
Article
This paper investigates effects of going-private buyout proposals made from 1974 to 1985 on the value and default risk of convertible and nonconvertible debt and preferred stock securities. Positive average price reactions are documented for public convertible securities and nonconvertible preferred stock; many of these issues are redeemed as part...
Article
This paper investigates share price reactions of parent firms to announcements of public offerings of stock of wholly-owned subsidiaries. The average abnormal gains associated with ‘equity carve-out’ announcements contrast with the average abnormal losses documented here and elsewhere upon announcements of public offerings of parent equity. Four fe...
Article
In Schipper and Thompson [1983] (henceforth ST), we estimated a pooled cross-section, time-series model of the return-generating process for the common stock in a sample of related firms. Some of the test statistics reported, based on linear constraints across estimated! coefficients, are quadratic forms in the sample covariance matrix. Under the s...
Article
This paper investigates the effect of voluntary corporate spin-off announcements on shareholder wealth. A significant positive share price reaction is documented for 93 voluntary spin-off announcements between 1963 and 1981. These shareholder gains do not appear to come wholly at the expense of bondholders. Evidence suggests the gains to shareholde...
Article
The article discusses the stockholders of acquiring firms, particularly the effect that corporate merger regulations as laid out by the U.S. government have on those firms. Of particular interest here are the Williams Amendments to the U.S. Tax Reform Act of 1969, the Accounting Principles Board (APB) Opinions 16 and 17, and the U.S. Securities and...
Article
We measure the impact of acquisitions activity on firm value by differentiating between specific merger events and programs of acquisition activity. Based on a sample of conglomerate acquirers, we find significantly positive abnormal performance associated with the announcement of acquisitions programs and significantly negative performance associa...
Article
Full-text available
This paper reexamines whether accounting information quality proxied by accruals quality is priced. We find in two-stage cross-sectional regression tests that accounting information quality proxied by accruals quality (AQ) is a priced risk factor once excluding low-priced stocks. Our results are robust to various approaches of portfolio formations...
Article
We examine how the amount and configuration of firm-specific news events affects inferences about the informativeness of eight types of firm-specific announcements. After establishing that confounding news events are neither infrequent nor random around these announcements, we investigate how the presence of confounding news events affects measures...
Article
Full-text available
The Financial Accounting Standards Committee of the American Accounting Association (hereafter the Committee) is charged with responding to requests for input from standard setters on issues related to financial reporting. The Committee is pleased to respond to the FASB's invitation to comment on the G4+1 Special Report, "Leases: Implementation of...
Article
Full-text available
The Financial Accounting Standards Committee of the American Accounting Association (hereinafter, the Committee) is charged with responding to requests for input from standard setters on issues related to financial reporting. The Committee is pleased to respond to the invitation to comment on the Special Report of the G4+1 (hereinafter, the "Group"...
Article
Full-text available
We investigate the ability of forecast patterns to convey information about an analyst's predictive ability. We establish an equilibrium strategy where the analyst issues a forecast only if the realization of his private signal exceeds a threshold. In equilibrium, higher-ability analysts choose higher thresholds than lower-ability analysts, and inv...
Article
Prospect theory predicts that managers will take actions to avoid financial reporting outcomes that deviate unfavorably from benchmark reference points. We examine this prediction by analyzing the incidence of working capital deficits, measured as current ratios less than 1.0 (that is, we take current liabilities as the reference point for current...
Article
Taking as given the discretionary accruals models that exist in the literature, we examine how the selection of peer firms affects the researcher's ability to detect earnings management. Researchers commonly estimate accruals models in cross section, and define the peer set (the firms used to estimate the cross section) as all firms in the same ind...
Article
In this paper I hypothesize that the well documented positive mean excess stock return earned by parent firms when they announce they are carving out stock in a subsidiary is due to noise traders who optimistically misinterpret a carve-out's true value-irrelevance, rather than to the impounding of new value-enhancing information by sophisticated in...
Article
We analyze the ability of earnings and non-earnings performance metrics to explain stock returns for industries where we identify, ex ante, an allegedly preferred (for valuation purposes) performance metric. We identify three industries each where earnings before interest, taxes, depreciation and amortization (EBITDA) and cash from operations are p...
Article
Auditors risk costly litigation and loss of reputation when they are associated with clients that engage in substandard financial reporting, and prior research argues that accounting conservatism reduces managements" tendency to misreport. Thus, we predict that client conservatism affects auditor-client contracting by reducing auditor litigation an...

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