INTERIM EARNINGS MANAGEMENT AND THE FOURTH QUARTER GOOD NEWS EFFECT

This paper presents evidence of a larger return reaction (variance) to fourth quarter announcements that induce contemporaneously positive returns. The results are consistent with: (i) audited annual announcements being marginally more informative for reports that corroborate previously unaudited interim good news claims, and (ii) the level of marginal informativeness being a decreasing function of interim auditor involvement (proxied by firm size). The good news effect is robust over time, and sensitivity analyses fail to support competing explanations for the effect attributable to report timing differences or comparatively noisy fourth quarter bad news reports.     

THE EFFECT OF ANALYSTS' FORECASTS ON EARNINGS MANAGEMENT IN FINANCIAL INSTITUTIONS

I test a market consensus hypothesis about earnings management in the banking industry. This hypothesis states that when analysts have reached a consensus in their earnings forecasts, managers have an incentive to manage earnings through discretionary accruals to achieve market expectations. A sample of banks is partitioned based on the degree of forecaster consensus, and the behavior of one discretionary accrual, the loan loss provision, is predicted for each partition. The results suggest bank managers make greater use of the loan loss provision to manipulate earnings in a discretionary manner when analysts have reached a consensus in their earnings predictions.     

ACCRUAL MANAGEMENT TO MEET EARNINGS TARGETS: UK EVIDENCE PRE- AND POST-CADBURY

Central to both the Cadbury Committee’s initial remit and its subsequent recommendations is the view that director integrity and board effectiveness play key roles in ensuring the quality and reliability of published financial statements. Using a constant sample, this paper tests whether the association between board composition and earnings management activity differs between the pre- and post-Cadbury periods. Earnings management is measured by the use of income-increasing abnormal accruals when unmanaged earnings undershoot target earnings. Results provide evidence of accrual management to meet earnings targets in both periods. However, while we find no evidence of an association between the degree of accrual management and the composition of the board of directors in the pre-Cadbury period, results for the post-Cadbury period indicate less income-increasing accrual management to avoid earnings losses or earnings declines when the proportion of non-executive directors is high. These results are consistent with the view that appropriately structured boards are discharging their financial reporting duties more effectively post-Cadbury.     

EARNINGS MANAGEMENT AND CORPORATE OWNERSHIP STRUCTURE: AN EXAMINATION OF EXTRAORDINARY ITEM REPORTING

This study examines the empirical relation between a three-way classification of corporate ownership structure and earnings management through the use of extraordinary item (EI) reporting. The EI reporting decisions examined are those made during 1960-1966, a time period when US reporting standards allowed considerable management discretion with respect to both the classification of EIs and their placement in the financial statements (i.e., income. versus retained earnings statement). Overall, the results provide strong support for income-increasing behavior by non-owner managers. Importantly, the results also suggest that the three-way ownership classification scheme used in this study is superior to the dichotomous owner-controlled/managercontrolled classification typically used in accounting studies.     

THE ROLE OF LOAN LOSS PROVISIONS IN EARNINGS MANAGEMENT,CAPITAL MANAGEMENT,AND SIGNALING: THE SPANISH EXPERIENCE

While much research has been conducted in the United States on the use of loan loss provisions (LLPs) as a mechanism for managing earnings, managing capital, and as a tool for signaling future earnings strategies, there is a paucity of research in Europe. In this research, we replicate methodology used by Ahmed, Takeda and Thomas (1998) and examine the relative importance of key factors affecting the LLP decisions of Spanish depository institutions. Among others, we focus on the role of organizational structure. We specifically examine if and how LLPs are used prior to and after the implementation of capital adequacy regulations in the Spanish depository industry in 1992. Our results indicate that while LLPs were not used as a tool for managing capital after the new regulation came into effect, banks have now adopted a more aggressive earnings management strategy. This appears to be because the capital adequacy regulation of 1992 removed any capital constraint that hitherto acted as a disincentive to aggressive earnings management. Commercial banks appeared to adopt a more aggressive earnings management as well as capital management strategy than savings banks in the post regulatory era. Finally, we did not find evidence that LLPs were used as a signaling tool by Spanish banks to portray their intentions about future earnings.     

MANAGEMENT EARNINGS FORECASTS: THEIR USEFULNESS AS A SOURCE OF FIRM-SPECIFIC INFORMATION TO SECURITY ANALYSTS

Although managers frequently release earnings forecasts, little is known about how this information affects investor beliefs. This study compares changes in analyst earnings forecasts following the release of management forecasts: (1) to changes in analyst forecasts of a control sample of nonforecasting firms; and (2) between management forecasts with differing degrees of accuracy. The forecasting error of analyst estimates for firms releasing management forecasts decreases more rapidly than the errors associated with the control firms, which implies that management forecasts are useful. Analysts apparently are capable of determining which management forecasts are most accurate and responding appropriately.     

被4G颠覆的资产管理世界

移动互联网是人类社会经由农业文明、工业文明向信息文明迈进的引爆点和催化剂,许多我们熟悉的经济规律和价值原则都正在被改写,这将会对未来的资产管理产生颠覆性的影响。     

THE ASSOCIATION BETWEEN EXECUTIVE SUCCESSION AND DISCRETIONARY ACCOUNTING CHANGES: EARNINGS MANAGEMENT OR DIFFERENT PERSPECTIVES?

This paper investigates the association of executive changes with both income increasing and decreasing accounting changes. Two potential explanations for the hypothesis that firms with changes in CEOs are more likely to make accounting changes are examined. The earnings management explanation holds that new management intervenes in the financial reporting process in order to alter perceptions of effectiveness. The different perspectives explanation holds that managements have different tastes, perspectives, or views of the world than the predecessor. Evidence supports the different perspectives explanation.