Earnings announcement timing,uncertainty, and volatility risk premiums

We examine the relationship between firms’ quarterly earnings report timing and uncertainty before quarterly earnings announcements. Prior research provides conflicting predictions on how investor uncertainty and report timing are related. Using implied volatilities from equity options and the realized returns to straddle positions, we find evidence that uncertainty and volatility risk premiums are higher for firms that report later in the quarter. Further tests show that the increase in option premiums is unexplained by risk factors suggesting a mispricing by investors. These results are not associated with static firm-level factors and our findings are concentrated in high growth firms.     

Can Accounting Earnings Predict Future GDP Growth? Evidence from China

This study investigates whether accounting earnings can predict future Gross Domestic Product (GDP) growth within China’s institutional settings. Konchitchki and Patatoukas (2014a) find that accounting earnings is a significant leading indicator of GDP growth for the next three or four quarters. We conjecture, however, that earnings management would weaken such predictive power for accounting earnings because it distorts earnings from real corporate profit. As earnings of Chinese firms are more seriously manipulated than those of US firms, this study finds that earnings of Chinese listed firms can only predict GDP growth for a single quarter. We further decompose accounting earnings into operating cash flow and accrual earnings and find that operating cash flow which is less affected by earnings management has better predictive power for GDP over the longer horizon of the next three quarters, but accrual earnings can only predict GDP growth for the next quarter.     

费用粘性会影响盈余信息质量吗？——来自我国上市公司的经验证据

文章研究了费用粘性对上市公司盈余信息质量的影响,并进一步研究了费用粘性在不同情形下对盈余信息质量影响的差异。文章发现,费用粘性越大,公司会计盈余持续性越低,盈余反应系数也越小。研究结果同时表明,当公司管理层预期较为乐观以及在2008年金融危机之前,费用粘性对盈余反应系数的负向影响更大。最后,文章也发现有效的外部监督机制会抑制费用粘性的作用,国际四大审计公司的费用粘性与盈余信息质量的负向关联相对较弱。文章的结论对拓展费用粘性经济后果研究具有一定的理论价值。     

The Relation between Abnormal Main Fund Movements and Subsequent Earnings Management: Political Costs and Political Connections

Movement of major fund1 flows has great impact on capital markets, especially in China. This study investigates the relationship between abnormal main fund movements and firm’s earnings management behavior, specifically, whether the abnormal main fund movements cause firms to keep a low profile for “self-protection” from being detected by the government. The empirical results of this study suggest that: (1) The mandatory disclosure of the “Top-ten circulating stockholders” requirement does not only reduce information asymmetry between investors and listed firms, but also strengthens and improves the efficiency of related government regulations in detecting disclosure of false information. This, in turn, increases the risk of being detected for firms with earnings management activities. (2) After abnormal main fund movements, relevant firms significantly reduce the level of earnings management to avoid attention from the public and regulatory agencies. (3) Using political connections as a proxy for the “shield effect” to mask political cost, we show that the negative relation between abnormal main fund movements and earnings management exists only for the subsample of firms without political connections. This paper provides a new angle for political cost study, and suggests that traditional political cost hypothesis should be further generalized.     

Tourism expansion and corporate earnings in the tourism industry

Although tourism expansion is theoretically assumed to have a direct influence on the tourism industry, previous studies have not found any significant connection between tourism expansion and tourism firms’ stock performance. This study argues that tourism expansion would have a more direct impact on tourism firms’ earnings than on their stock performance. Accordingly, whether tourism expansion can create significant growth in corporate earnings for tourism firms is tested on the basis of a Granger non-causality procedure using a four-variable vector autoregression model. Test results support the assumption that tourism expansion could significantly improve the corporate earnings of tourism companies. The analyses of the generalized impulse response function and variance decomposition further indicate the critical role of tourism expansion in explaining increases in the tourism industry's corporate earnings. Policy implications are provided to guide the government tourism authorities.     

Do XBRL filings enhance informational efficiency? Early evidence from post-earnings announcement drift

In 2009, the Securities Exchange Commission (SEC) mandated public firms to file their financial statements using eXtensible Business Reporting Language (XBRL). The SEC's main motive behind this mandate is that XBRL filings would enhance the informational efficiency in the stock markets by making financial data easier to use and analyze for a broad range of investors. Using a sample from the first wave of mandated XBRL filers, we find a decline in post earnings announcement drift for the good news portfolio in the post-XBRL adoption period. Instead of a drift associated with underreaction, we find that markets overreact to negative earnings surprises for the bad news portfolio during our observation period, which coincides with the financial crisis. We detect limited evidence that XBRL adoption mitigates overreaction, which is another form of market inefficiency. We also find limited evidence that XBRL particularly benefits small investors.     

Misleading Disclosure of Pro Forma Earnings: An Empirical Examination

The Sarbanes–Oxley (SOX) Act was passed in 2002 in response to various instances of corporate malfeasance. The Act, designed to protect investors, led to wide-ranging regulation over various actions of managers, auditors and investment analysts. Part of SOX, and the focus of this study, targeted the disclosure by firms of “pro forma” earnings, an alternate (from GAAP earnings), flexible and unaudited measure of firm performance. Specifically, SOX directed the Securities and Exchange Commission (SEC) to craft regulation which would reduce – and preferably eliminate – any pro forma earnings disclosure which might be “misleading”. Examining earnings press releases over a 3-year period, this study addresses three questions. Were firms disclosing pro forma in a potentially misleading manner, what was the nature of this potentially misleading disclosure, and did SOX affect the disclosure practices? We find the following. In 2001 (prior to SOX), 53 firms – over 10% of all U.S. S&;P 500 firms – were disclosing pro forma earnings in a potentially misleading manner. This was being done most commonly by using traditional GAAP terminology (e.g., “net income”) in the press release headline to describe what was later in the press release revealed to be a pro forma amount (i.e., “net income excluding special items”). By 2003 (subsequent to the SEC regulation), potentially misleading disclosure practices were seen in less than 1% of the earnings press releases of S&;P 500 firms. This significant reduction suggests that managers, prior to the regulation, were either careless in their pro forma reporting practice, or were intentionally – and unethically – attempting to mislead investors. Either way, we conclude that the SEC regulation was both necessary and effective.     

Stock price informativeness and analyst coverage

We examine whether more analyst coverage translates into more informative stock prices and apply this to both developed and emerging markets. We measure price informativeness using the association between current stock returns and future earnings. We argue that more informative stock prices contain more information about future earnings. Results indicate that analysts' activities do not contribute to the impounding of future earnings information into current stock prices, in accordance with the view that analysts are outsiders who do not have full access to firm‐level information. We also find that analysts specialize according to industry and that “industry expertise” is limited to developed countries. Overall, our evidence is consistent with the explanation that analysts focus on gathering and mapping industry‐ and market‐level information (macroeconomic information) into stock prices. Copyright © 2013 ASAC. Published by John Wiley & Sons, Ltd.     

上市公司盈余管理、市场反应与政府监管

上市公司天然存在盈余管理的动机,伴生着规避盈余损失或盈余下降的行为,本文基于信号传递理论,对上市公司盈余管理行为引发投资者行为变化进而引起相关监管部门的重点监督进行研究。在以我国2006—2009年A股上市公司为样本的实证研究中,我们发现:上市公司普遍存在着盈余管理行为,投资者能够识别上市公司盈余管理行为并与上市公司形成利益共同体,共同追求超额收益。     

证监会处罚对公司盈余管理的影响后果及机制研究

以2001—2009年因财务舞弊而被证监会处罚的上市公司为样本,检验公司受罚前后的盈余管理行为变化,结果发现:违规公司受罚后的盈余管理行为不仅没有减少,反而更多地使用了较为隐蔽的盈余管理方式——构建真实的活动以规避证监会的处罚;就处罚强度和处罚引起的市场反应这两种影响机制而言,市场反应的作用相对更大,市场反应的弱化会对公司的盈余管理行为起反向的激励作用。     

Institutional Investors,Earnings Quality and Asset Liquidity: Evidence from China’s Stock Market

This paper investigates how institutional holding and earnings quality influence the liquidity of assets. Contrary to findings in developed markets, we document several novel results in China’s stock market: (1) institutional holding negatively affects assets’ liquidity, (2) earnings quality is negatively related with liquidity. Since earnings quality captures asymmetric information, low earnings quality induces high divergence in investor opinions and thus boosts market trading, and (3) interestingly, the effect of earnings quality on liquidity is greater if institutional investors’ holding is at a high level. Overall, our findings cast doubt on the conventional wisdom that institutional investors and earnings quality improve market liquidity. The results are robust to different measures and alternative model specifications.     

To improve investors' valuation of accounting earnings in emerging markets: evidence from Taiwan

The valuation of accounting earnings is related to the level of earnings management used by the firm. In emerging markets where earnings management is typically pervasive, investors lose confidence in accounting earnings and thus tend to under‐value earnings. Using data from Taiwan, we show that better governance characteristics are associated with improved investor valuation of accounting earnings. Under weaker governance structures, such as excessive control on the part of majority shareholders, small board size, and chief executive officer/chairman of the board duality, the market tends to under‐value accounting earnings. Reducing controlling shareholders' ownership, increasing board size, and reinforcing the monitoring function of the board improves investors' ability to value accounting earnings. Copyright © 2010 ASAC. Published by John Wiley & Sons, Ltd.     

中国股市SEO后股票收益及公司业绩的双重长期弱势表现

以中国股市于2000年和2001年间进行新股增发的33支A股股票为样本研究发现,增发后SEO股票无论是在投资收益方面还是在公司业绩方面,长期内都表现出显著的弱势现象。在进一步研究弱势表现的原因时发现,SEO前发行公司过度的盈余管理导致了发行后经营业绩的长期弱势表现;SEO前,投资者对即将增发的股票存在着系统性高估,SEO后的长期股票收益弱势是投资者根据发行后公司的实际业绩对原本过度乐观的预期逐步进行理性调整的结果。     

Executive Compensation and Earnings Persistence

Governing boards utilize executive compensation contracts in an attempt to align executive actions with corporate goals. The objective is to ensure that executive performance provides value to the organization in terms of successful outcomes. A key performance criteria typically specified in CEO compensation contracts is earnings targets. However, using earnings as a performance evaluation may be problematic because some firms exhibit robust and sustained earnings over time (high earnings persistence), and other firms, such as high growth oriented firms, exhibit weak or sometimes negative earnings over time (low earnings persistence). Our study reveals that the effect of high earnings persistence results in firms that focus more heavily on cash compensation (salary and bonus) rather than on equity compensation (stock options, etc.) to compensate executive performance. Additionally, for firms characterized by low earnings persistence, our study indicates that cash flows from operations act as a supplementary performance measure to accounting earnings, and become increasingly important as a means to justify executive cash compensation.     

Unemployment governance,labour cost and earnings management: Evidence from China

This study investigates the effect of labour cost on earnings management based on the panel data of listed firms in China. We use the average wage of employees in firm level as the proxy for labour cost. Firms with rising labour cost become more likely to engage in negative earnings management to conceal profits or report losses. The effect becomes more significant in state-owned enterprises, labour-intensive enterprises, firms in high unemployment-rate regions and firms with political connections. Further research finds that, under the institutional background of Chinese unemployment governance, firms get more government subsidies and tax preferences and reduce the excessive employment through negative earnings management. To a certain extent, this weakens the policy effect of unemployment governance. Overall, our conclusions are meaningful to the reform of unemployment governance, the standardisation of earnings management behaviour, the improvement of the government subsidy policies and the improvement of the efficiency of public resource allocation.     

新三板扩容对挂牌企业盈余管理行为影响研究

本文以2012-2014年全国中小企业股份转让系统挂牌企业为研究样本,基于自然事件研究的思路,考察新三板扩容及该背景下做市商制度对公司应计盈余管理与真实盈余管理行为的影响,以此揭示新三板制度发展对挂牌公司盈余质量的作用效果。研究发现：新三板扩容显著降低了挂牌企业的应计盈余管理及真实盈余管理程度;但是在高速扩容之下,做市商制度引入在一定程度上反而加剧了企业进行应计盈余管理与真实盈余管理,股票流动性提升后,企业实施费用操控的真实盈余管理水平也明显提升。     

Is the Annual Earnings Response Coefficient Statistically Significant in Brazil?

The aim of this paper is to analyze the significance of firm-specific and pooled earnings response coefficients in the Brazilian market. The lag structure of earnings-return relations is also analyzed. The sample consists of 61 Brazilian public firms that represent all firms with a minimum of seven continual data from 1995 to 2008. The analysis is based on linear regressions of two different proxies of earnings and two different proxies of return. The results show that, for firm-regressions, few companies presented a significant relationship between earnings and stock returns, and for some firms a negative coefficient was found. In the pooled regressions a positive and statistically significant coefficient was found, and the tests suggest that variance in cross-sectional observation is more relevant in explaining the earnings response coefficient than the time-series variance.     

中国亏损上市公司资产减值准备计提行为研究

Economic factors, such as the adverse change of the industry and performance of firms, are associated with the impairment of assets reported by these firms. Listed firms with negative earnings were more likely to write off substantial assets in consecutive years, but not in the initial years of loss. However, the relationship between the impairment of assets and economic factors is insignificant after the individual effect of the firms is taken into consideration, while earnings management factors still have a significant effect on the impairment of assets, yet the difference between loss years and profitable years is insignificant. Translated from Caijing Yanjiu 财经研究 (Journal of Finance and Economics), 2005, (7): 71–82     

盈余持续性研究综述

对国内外盈余持续性研究的文献进行回顾,说明了盈余持续性研究的状况。目前我国关于盈余持续性的研究不多,在模型选择和方法上也对国外的研究跟踪不足。     

中国上市公司现金流管理研究——兼对中美市场现金流管理行为比较研究

This paper examines cash flow management in the Chinese market and compares it to that in the U.S. market. It adopts Burgstahler and Dichev (1997) and Degeorge et al.’s (1999) method and the best-fitted distribution model to analyze the financial data of Chinese listed firms during 1998–2005 and the forecasted cash flow per share (CPS) data for Chinese firms in the I/B/E/S database during 1993–2005. Results reveal that cash flows reports are not as reliable as people think, and managers manipulate cash flows just as they manipulate earnings. Further analyses show that zero point, last year’s cash flow and analyst cash flow forecast are the three thresholds that influence managers’ decision when they report cash flow performance. Over 16% of the firms with small positive cash flows manipulate their cash flow. Moreover, 16.64% of the firms with small changes in cash flow and 9.81% of the firms with small surprises manipulate cash flows to reach the targets. A comparative analysis shows that cash flow management behaviors around zero and zero changes are more prevalent in the Chinese market than in the U.S. market. Cash flow management around analyst cash flow forecasts, however, is no more prevalent than that in the U.S. market. Translated and revised from Zhongguo Kuaiji Pinglun 中国会计评论 (China Accounting Review), 2007, 5(3): 381–400