Martin Walker

Martin Walker
The University of Manchester · Manchester Accounting and Finance Group, Manchester Business School (MBS)

BA(Hons), Ph D

About

140
Publications
39,559
Reads
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5,144
Citations
Citations since 2017
18 Research Items
2213 Citations
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20172018201920202021202220230100200300
20172018201920202021202220230100200300
Introduction
Corporate Reporting and Capital Markets
Additional affiliations
July 1989 - July 2015
The University of Manchester
Position
  • Professor of Finance and Accounting

Publications

Publications (140)
Article
This paper studies the relation between the quality of corporate narrative disclosure and the timeliness of goodwill impairments. We combine five measures of the linguistic content of annual report narratives to generate a proxy for narrative disclosure quality. To measure the timeliness of impairments, we deploy a model that relates observed goodw...
Article
This study finds that the financial press serves an important monitoring role by interpreting the tone of corporate announcements, moderating its impact to market participants in the process. Using textual analysis, we report that the press attenuates both the positive and negative tone of firm-initiated disclosures. However, the effect is asymmetr...
Article
We examine the role of voluntary corporate press releases about firms’ financial performance as a stimulus for financial media coverage. We find that there is a spike of media articles on the same day and one trading day following firms’ press releases. We provide evidence that managers compete for media attention and can use voluntary press releas...
Article
Full-text available
We hypothesize and test for a U-shaped relation between the cost of equity capital and the level of disclosure in annual report narratives. Using a computer-generated word-count-based index of the level of disclosure in U.K. annual report narratives, we document a negative relation with the cost of equity capital at low levels of disclosure, and a...
Working Paper
Full-text available
We examine the role of voluntary corporate press releases about firms’ financial performance as a stimulus for financial media coverage. We find that there is a spike of media articles on the same day and one trading day following firms’ press releases. We provide evidence that managers compete for media attention and can use voluntary press releas...
Article
Full-text available
We provide a methodological contribution by developing, describing and evaluating a method for automatically retrieving and analysing text from digital PDF annual report files published by firms listed on the London Stock Exchange (LSE). The retrieval method retains information on document structure, enabling clear delineation between narrative and...
Article
Full-text available
We critically assess mainstream accounting and finance research applying methods from computational linguistics (CL) to study financial discourse. We also review common themes and innovations in the literature and assess the incremental contributions of work applying CL methods over manual content analysis. Key conclusions emerging from our analysi...
Preprint
Full-text available
We critically assess mainstream accounting and finance research applying methods from computational linguistics (CL) to study financial discourse. We also review common themes and innovations in the literature and assess the incremental contributions of work applying CL methods over manual content analysis. Key conclusions emerging from our analysi...
Article
Full-text available
We re-examine previous seminal studies on conditional conservatism (CC) that apply the asymmetric timeliness (AT) measure of Basu (1997) and compare the outcomes with those based on the modified AT (MAT) measure of Badia, Duro, Penalva, & Ryan (2021) and the spread in conditional variances (SCV) measure of Dutta & Patatoukas (2017). Our conclusions...
Article
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We examine the potential for IFRS to influence the market for SEOs in the UK and France. The divergence between the UK domestic accounting standards and IFRS is minor (low-divergence firms) whereas domestic accounting standards in France differ materially from IFRS (high-divergence firms); however, both countries have similar legal enforcement and...
Article
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We exploit the mandatory adoption of International Financial Reporting Standards (IFRS) as a source of exogenous shock to the corporate financial information environment to study the potential effect that this information shock might have on the dividend payout policy and dividend value relevance in the UK and France. We employ a difference-in-diff...
Article
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We document that analysts cater to short-term investors by issuing optimistic target prices. Catering dominates among analysts at brokers without an investment banking arm as they face lower reputational cost. The market does not see through the analyst catering activity and their forecasts lead to temporary stock overpricing that short-term instit...
Article
The paper examines three benchmark earnings concepts: (i) permanent earnings with the cost-of-equity determining the capitalization, (ii) permanent earnings with the risk-free rate determining the capitalization, and (iii) economic earnings (Hicks’ concept). The concepts can be measured empirically using stock prices. The study explains how the th...
Article
This paper examines whether state subsidy is a determinant of the voluntary corporate social responsibility (CSR) disclosures of Chinese listed firms. Using archival data from a sample of manufacturing firms listed on the Shanghai and Shenzhen Stock Exchanges from 2008 to 2012, we find that state subsidies have a material influence on CSR disclosur...
Article
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We study the relation between analysts’ target price revisions and recent market returns, excess stock returns, and other analysts’ target price revisions. Empirical results show that, after controlling for earnings forecast and recommendation revisions, target price revisions are associated with each of these information sources. We also find that...
Article
Full-text available
In this study we investigate the complementary effect of firm-level incentives and IFRS adoption on the informativeness of accounting reports in Brazil. Using a specially constructed corporate governance index—Brazilian Corporate Governance Index (BCGI)—we show that the quality of corporate governance is linked to the growth opportunities firms fac...
Article
We develop, describe and evaluate a web-based software tool for batch extraction and analysis of digital PDF annual report files. The retrieval method retains information on document structure thereby enabling clear delineation between narrative and financial statement components of reports, and between individual sections within the narratives com...
Article
We examine the comparability benefits for analyst forecast accuracy following IFRS adoption in the EU. We argue that improvements in forecast accuracy are more likely to follow when IFRS implementation increases the number of closely relevant peer firms. To test this idea, we derive a firm-specific Expected Comparability Benefit (ECB) score as the...
Article
In 2004 the Transparency Directive increased the reporting frequency by mandating the Interim Management Statement (IMS). However, only nine years later, the EU announced that it was making quarterly reporting voluntary again, arguing that IMSs are redundant as they are unlikely to contain any additional information not already required by the Mark...
Chapter
This article provides an overview of market based accounting research, building on the important survey paper of Lev (1989).
Article
Full-text available
Prior research documents that analysts produce less biased forecasts for stocks with high institutional ownership. We show that this result holds only for long-term institutional investors. In the presence of short-term institutional investors, such as hedge funds, analysts strategically bias their forecasts, specifically, they issue optimistic tar...
Article
DeAngelo and DeAngelo (2006) (D&D hereafter) argue that ‘payout policy is not irrelevant and investment is not the sole determinant of value, even in frictionless markets.’ We first re-examine their critique using M&M’s (1961) multiperiod valuation framework and identify non-essential operating cash expenses as an important mechanism for managerial...
Article
Full-text available
We examine the impact of managerial financial reporting incentives on accounting quality changes around International Financial Reporting Standards (IFRS) adoption. A novel feature of our single-country setting based on Germany is that voluntary IFRS adoption was allowed and common before IFRS became mandatory. We exploit the revealed preferences i...
Conference Paper
Full-text available
This project uses computer-based natural language processing (NLP) methods to analyse the content of annual report narrative disclosures by UK firms listed on the London Stock Exchange. Company law requires UK firms publish an annual report containing audited financial statements together with substantial narrative disclosures on a range of busines...
Article
This paper studies the effects of bank accounting conservatism on the pricing of syndicated bank loans. We provide evidence that banks timelier in loss recognition charge higher spreads. We go onto consider what happens to the relationship between spreads and timeliness in loss recognition during the financial crisis. During the crisis, banks timel...
Conference Paper
Full-text available
In this paper we present the evaluation of our automatic methods for detecting and extracting document structure in annual financial reports. The work presented is part of the Corporate Financial Information Environment (CFIE) project in which we are using Natural Language Processing (NLP) techniques to study the causes and consequences of corporate...
Article
Consistent with the prevailing socio-political ideology of China, the Chinese government offers financial assistance to firms, including many listed companies. Government subsidies are provided for several reasons including support for investment, support to enable firms to pursue social objectives, and support to prop up ailing firms in order to p...
Article
Recent public policy debates have led to increased calls for full transparency of executive compensation. However, in practice, many firms are reluctant to disclose the full details of how they link executive compensation to performance. One possible reason for lack of full disclosure is that managers use their power to hide the details of their co...
Article
The article reviews the recent academic research literature on earnings management (EM) with a view to identifying research themes and results of interest to users and preparers of financial statements, accounting standard setters, and others with responsibility for ensuring that companies provide financial information to shareholders that can be r...
Article
We study the influence of conditional accounting conservatism on domestic investor diversification decisions. We argue that a conservative accounting system that promotes the dissemination of bad news and which constrains managers from engaging in opportunistic activities reduces the need for investors to concentrate their ownership, and consequent...
Article
Previous studies of relative performance evaluation (RPE) for executive compensations in Western developed markets have produced mixed findings. This is partly because the dispersion of share ownership in Western capital markets does not closely correspond with the single-principal/multi-agent theoretical setting assumed by Holmstrom (1982). In thi...
Article
Full-text available
This paper investigates the motives for disclosing an alternative Earnings per Share (EPS) figure. In particular, we extend prior findings for the UK (Choi, Lin, Walker & Young, 2007) by highlighting the role of managerial contracting in the alternative EPS disclosure choice. We examine a specific contractual setting where management is especially...
Article
Full-text available
We examine the effect of IFRS on the use of accounting-based performance measures for evaluating and rewarding managers. We show that post-IFRS firms decrease the weight of Earnings-per-Share (EPS) based performance measures in CEO pay contracts. We provide indications that IFRS add “noise” to accounting numbers which, based on optimal contracting...
Article
This paper evaluates the hypothesis that the difference between reported earnings and permanent earnings approximates zero, on average. We measure a firm’s permanent earnings using its stock price, and the short term interest rate determines the permanent earnings to price relation. The hypothesis corresponds to the idea that a firm’s capitalized r...
Article
Using a sample of Brazilian listed firms for the period 1998–2004 we find evidence that revaluations of fixed assets are negatively related to future firm performance, prices and returns. We also find that the decision to revalue is negatively associated with scores on a Brazilian Corporate Governance Index (BCGI) and positively associated with ind...
Article
Full-text available
We examine whether the type of performance measures included in a CEO pay contract is associated with the UK GAAP to IFRS reconciliation process. Using a comprehensive dataset, mainly hand-collected from the firms’ remuneration reports, we report strong indications that, given the existence of an accounting-related vesting target in their contract,...
Article
Using an international sample of 16 countries, this paper examines if analyst- and country-specific characteristics explain the variation in target price (TP) accuracy. We find that significant variation in average TP accuracy across countries is due to differences in accounting disclosure quality, the origin of the legal system, cultural traits, a...
Article
We extend standard models of conditional earnings conservatism and adaptation value to the context of the corporate refocusing activities of UK listed companies. This analysis is interesting because refocusing activities are: (i) commonly anticipated by significant negative returns in the financial year(s) before the refocusing event; (ii) typicall...
Article
  This study explores the market response to achieving analyst earnings expectations, distinguishing between expectations achieved through earnings forecast guidance and earnings management. We consider three earnings management tools: real earnings management, working capital accruals management, and classification shifting. Analysis indicates tha...
Article
Full-text available
Manuscript Type: Empirical Research Question/Issue: This paper provides new evidence on the effect of compensation consultants on CEO pay. Research Findings/Insights: We produce new evidence on the managerial power approach (MPA) to corporate governance by examining the influence of compensation consultants on CEO pay structures and the decision to...
Article
This paper argues that the optimal design of accounting standards may depend on the institutional characteristics of the political and economic system. There are several varieties of capitalism, and it is not obvious which of these varieties is best. Moreover, the existence of different varieties of capitalism arguably promotes economic progress. T...
Article
Financial Reporting Standard No3 (FRS 3): Reporting Financial Performance, which came into force in 1993, increased UK firms' discretion in classifying exceptional items. We examine how this increased discretion affected their use of classificatory smoothing and inter-temporal smoothing through abnormal accruals to offset temporary shocks in perfor...
Article
We examine the economic consequences of the mandatory adoption of IFRS in EU countries by showing which types of economies have the largest reduction in investment-cash flow sensitivity post-IFRS. We also examine whether the reduction in investment-cash flow sensitivity depends on firm size as well as economy type. We find that the investment-cash...
Article
Full-text available
We investigate whether the choice of valuation model affects the forecast accuracy of the target prices that investment analysts issue in their equity research reports, controlling for factors that influence this choice. We examine 490 equity research reports from international investment houses for 94 UK-listed firms published over the period July...
Article
We document that the quality of public and private information available to investors improves before seasoned equity offerings (SEO) but deteriorates shortly thereafter. As firms improve their financial communication, analyst earnings forecasts become more accurate and less biased. However, forecast optimism increases after the offering. Firms tha...
Article
This paper provides new evidence on the effect of compensation consultants on CEO pay. We show that the use of a compensation consultant has an increasing effect on the level of total CEO compensation, which is consistent with the “ratcheting up” effect of consultants on CEO pay argued by the managerial power approach. However, we also find that th...
Article
We received many helpful comments and suggestions from Sudipta Basu, two anonymous referees and Sanjay Kallapur (Editor). Dick Dietrich provided invaluable assistance with specification and statistical issues. We also thank Abstract Despite the conceptual appeal and popularity of the differential timeliness measure of conditional conservatism propo...
Article
We extend the prior literature on biased disclosure decisions by examining whether, when and how managers bias the tone of forward‐looking narratives. In order to measure tone we employ techniques of manual content analysis and we aggregate positive, neutral and negative statements into an overall measure of tone.We then analyse the frequency of po...
Article
ABSTRACT We examine whether earnings reconciliation from U.K. generally accepted accounting principles (GAAP) to International Financial Reporting Standards (IFRS) convey information. As a result of debt contracting, mandatory accounting changes are expected to affect the likelihood of violating existing covenants based on rolling GAAP, leading to...
Article
We show that the level of conditional accounting conservatism of foreign markets is significantly and positively associated with decisions to diversify portfolios internationally. This positive association could be either because conditional conservatism per se is attractive to international investors, or because the un-modelled factors that attrac...
Article
Previous research documents a number of potential scaling problems when estimating accounting based valuation models using cross-sectional data. The differences in size across observations cast doubts over the robustness of estimated coefficients and measures of fit. Several solutions have been proposed without reaching a consensus. We demonstrate...
Article
Full-text available
We investigate the joint effects of dividend propensity (i.e. whether a firm pays cash dividends) and voluntary disclosure on the relationship between current stock returns and future earnings. We examine whether dividend propensity and voluntary disclosure act as substitutes or complements in the financial communication process. We also examine wh...
Article
We examine whether UK firms engage in earnings management or forecast guidance to ensure that their reported earnings meet analyst earnings expectations. We explore two earnings management mechanisms: a) positive abnormal working capital accruals and b) classification shifting of core expenses to non-recurring items. We find no evidence of a positi...
Article
Full-text available
We examine the impact of incentives on accounting quality changes around IFRS adoption. In particular, we examine earnings management and timely loss recognition, constructs often used to assess accounting standards quality. While existing literature documents accounting quality improvements following IFRS adoption, we find that improvements are co...
Article
We complement recent research (Ball et al. 2003) which suggests that country-level incentives (i.e. legal origin and the level of capital market development) are the main determinants of the quality of financial reporting. Using a newly developed Brazilian Corporate Governance Index (BCGI) we perform an experiment in the poor quality accounting and...
Article
This paper explores the relationship between institutional shareholdings and CEO turnover. Uniquely to this field of research we separately model the institutions that have large blocks of shareholdings from those with smaller blocks. We show that the likelihood of a CEO being forced from office is negative and significantly related to firm perform...
Article
This paper analyses the relationship between institutional shareholdings and CEO cash-based remuneration. Uniquely to this field of research we specifically model the different elements of cash-based remuneration separately to account for the timing differences relating to their award and performance criteria. We document 5 significant empirical re...
Article
This study examines the economic consequences for UK firms of the European Union's decision to impose mandatory IFRS. We hypothesize that the impact varies across firms and is conditional on the perceived benefit. We estimate a counter-factual proxy for a UK firm's willingness to adopt IFRS from the prior GAAP choices of German firms. We show that...
Article
Full-text available
This paper provides new evidence on the relationship between managerial incentives and firm risk using a hand-collected database of 3307 executive year observations. We find that the relation between pay performance sensitivity and firm risk exhibits a nonlinear relationship with firm size: for small to medium-sized quoted companies there is a nega...
Article
We extend prior research into the association between disclosure quality and share price anticipation of earnings by discriminating between firms that report profits and firms that report losses. As a measure of disclosure quality we count the number of forward-looking earnings statements in annual report narratives. To measure the extent to which...
Article
Disclosure of executive compensation schemes has been made mandatory over the past decade in many countries including the UK and the US. Firms however tend not to fully disclose the functional form of their executive compensation schemes. This paper provides a rationale for the lack of voluntary disclosure by firms. It introduces a voluntary disclo...
Article
Financial Reporting Standard No 3 (FRS3) regulated the reporting of financial performance by UK firms from 1993 until the adoption of International Financial Reporting Standards in 2005. FRS3 outlawed extraordinary items, but allowed a clearer distinction between recurring and transitory income by giving firms discretion over the classifications of...
Article
This paper examines the question of mutual fund performance within an equilibrium asset pricing framework, and in particular gives attention to the reinterpretation of tests of fund performance provided by Peasnell, Skerratt and Taylor (JBFA 1979). The paper concludes that the reinterpretation provided by Peasnell et. al is flawed, and moreover, th...
Article
This paper provides a commentary on the four main papers presented at the 2006 Information for Better Market's Conference. Since the purpose of the conference is to encourage policy relevant research, this commentary discusses some of the key policy issues raised by the papers, and it identifies areas where either further work is needed or where a...
Article
Full-text available
We examine disagreement between management and Thomson Datastream over the persistence of earnings components. Using income statement and footnote disclosures, we identify the source and properties of disputed items. Disagreements typically reflect opaque reporting practices (for example, in the case of transitory operating items) and restrictive c...
Article
This study examines the seasoned equity issues of companies traded on the London Stock Exchange. Recent regulatory changes have allowed UK firms more discretion in choice of issue approach, and this has led many firms to issue through placing in preference to a rights issue. Having first documented the trend towards increasing use of placings, we g...
Article
This study contributes to the growing literature on cross-country differences in the value relevance of earnings and book value, focusing on the United Kingdom, France, Germany, and the Netherlands. The paper highlights four issues: 1. The potential improvements in value relevance obtained by partitioning earnings into its cash and accruals compone...
Article
Full-text available
This paper provides evidence on the level and composition of the pay of the top executives of a sample of UK Public Listed Companies. The study uses hand collected data on the compensation for 698 CEO years and 2609 other-executive years over the period 1995-2000. In order to focus on the consequences of exceptional performance, our sample is strat...
Article
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SYNOPSIS: This paper adopts a structured positive approach to explaining the valua-tion practices of financial analysts by studying the valuation nfiethodologies contained in 104 analysts' reports from international investment banks for 26 large U.K.-listed com-panies drawn from the beverages, electronics, and Pharmaceuticals sectors. We pro-vide a...
Article
This paper examines the executive compensation practices of listed U.K. retailing companies. We compare “New Economy” retailers (e-commerce/dot-coms) to more traditional retailers operating in the “Old Economy.” We also discriminate between recently floated retailers and their more seasoned counterparts. Using a sample of remuneration contracts for...
Article
We examine the implications of conservatism bias in reported earnings for research on analysts' earnings forecasts. We show that when earnings are conservative, in the sense of [J. Account. Econom. 24 (1997) 3], earnings changes are no longer equal to earnings surprises and the distribution of earnings surprises is left skewed, due to negative tran...
Article
Ryan and Taffler (2004) explore whether firm-specific information events drive economically relevant positive and negative stock price changes and trading volume and, if so, the nature of such information. I will begin by documenting what I see as the positive contribution of the paper, and then move on to consider some potential problems with the...
Article
Full-text available
The paper presents a new methodology for evaluating corporate voluntary disclosures in the annual report discussion section. Based on a new dataset of electronic annual reports and a standard text analysis software package, we text-search a large number of annual reports at minimal (marginal) cost. The resulting sample sizes are comparable to those...
Article
This study describes and explains the variety of disclosure practices employed by UK companies to report earnings per share measures following the introduction of FRS3. In addition to describing the practices of UK companies we construct an econometric model designed to explain the observed variation in the willingness of firms to disclose addition...
Article
This paper argues that there is a mis-match between formal theoretical accounting valuation models, and practical approaches to profitability analysis and valuation. In particular, none of the linear information models published to date exhibit an obvious role for profitability analysis. For example, in the standard Ohlson model, earnings and book...
Article
This paper examines the executive compensation practices of listed UK retailing companies. We compare New Economy retailers (e-commerce and dot.coms) to more traditional retailers operating in the "Old Economy". We also discriminate between recently floated retailers and their more seasoned counterparts. Using a sample of remuneration contracts for...
Article
Full-text available
This paper presents an empirical study of profit warnings issued by UK companies. The study adds value to the existing literature on warnings because it models the warning decision in a stock market economy that is significantly less litigious than the US. This in turn allows factors, other than the threat of litigation, to influence the decision t...
Article
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This paper examines the joint and incremental explanatory value of book value per share and two measures of earnings per share (Headline and FRS3 EPS) for the cross-section of UK share prices. We find that Headline EPS explains a significant proportion of cross-sectional variation in share price. Book value per share contributes incremental explana...
Article
This study shows that: (1) In addition to past earnings, incomplete contracts disclosed in the prospectuses of construction firms' IPOs is an important explanatory variable of earnings forecasts made by investment bankers. (2) Earnings forecasts can explain the offer prices set by investment bankers in the IPOs of construction firms. (3) Stock retu...