Intra‐Industry Information Transfers and the Post‐Earnings Announcement Drift

This study examines the role of intra‐industry information transfers in the analyst forecast‐based post‐earnings announcement drift. I find that subsequent same‐industry‐peer earnings announcements influence a firm's post‐earnings announcement drift if these subsequent announcements confirm the firm's initial earnings surprise and the firm's industry exhibits ex ante positive (common effect) intra‐industry information transfers. The results suggest that underreaction to industry‐specific information contributes to analyst forecast‐based post‐earnings announcement drift.     

Earnings Announcement Disclosures and Changes in Analysts' Information

This study examines how financial disclosures with earnings announcements affect sell‐side analysts' information about future earnings, focusing on disclosures of financial statements and management earnings forecasts. We find that disclosures of balance sheets and segment data are associated with an increase in the degree to which analysts' forecasts of upcoming quarterly earnings are based on private information. Further analyses show that balance sheet disclosures are associated with an increase in the precision of both analysts' common and private information, segment disclosures are associated with an increase in analysts' private information, and management earnings forecast disclosures are associated with an increase in analysts' common information. These results are consistent with analysts processing balance sheet and segment disclosures into new private information regarding near‐term earnings. Additional analysis of conference calls shows that balance sheet, segment, and management earnings forecast disclosures are all associated with more discussion related to these items in the questions‐and‐answers section of conference calls, consistent with analysts playing an information interpretation role with respect to these disclosures.     

Earnings Forecasts and Price Efficiency after Earnings Realizations: Reduction in Information Asymmetry through Learning from Price*

When information asymmetry is a major market friction, earnings forecasts can lead to higher price efficiency even after the information in forecasts completely dissipates upon earnings realizations. We show this in an experimental market that features information asymmetry (i.e., some traders possess differential private information). Earnings forecasts reduce information asymmetry and lead to prices that reflect a greater amount of private information. Traders can learn more about others' information from prices. This information learned from past prices continues to reduce information asymmetry and improve price efficiency even after earnings realizations. We contribute to the disclosure literature by showing the evidence that the learning‐from‐price effect amplifies the impact of public disclosure on price efficiency.     

盈利质量与利润反应系数

本文经过实证发现,收入和利润同时增长的公司具有(1)较好的盈利质量和(2)比只有利润增长的公司更大的利润反应系数(Earnings Response Coefficients,ERC).从盈利质量来看,收入上升拉动利润的公司的收益更具有持久性,更不易受到盈余管理的干扰,以及在未来具有更佳的业绩.从反应系数来看,这类公司的利润反应系数较大,而账面净资产反应系数则较小,这和Ohlson(1995)的结论相一致.     

The Earnings Quality Information Content of Dividend Policies and Audit Pricing

Recent studies indicate dividends are associated with higher‐quality earnings. Our study extends the literature by examining whether dividends' information is associated with auditors' assessment of their clients' earnings quality. Our results show that auditors charge lower fees to dividend‐paying clients than to nondividend‐paying clients and the average fee discount ranges from 6.0 to 10.6 percent. More importantly, we find dividends have an interactive effect with respect to earnings persistence and earnings manipulation: the negative association between audit fees and earnings persistence is more pronounced for dividend firms; and dividend payouts mitigate the positive relation between earnings manipulation risk and audit fees. Our results imply dividends reduce audit risk by enhancing clients' earnings quality information. We contribute to the literature by showing that auditors reflect the earnings quality information content of firms' dividend policies in their pricing decisions.     

Investors' Misweighting of Firm-Level Information and the Market's Expectations of Earnings

Prior studies use fundamental earnings forecasts to proxy for the market's expectations of earnings because analyst forecasts are biased and are available for only a subset of firms. We find that as a proxy for market expectations, fundamental forecasts contain systematic measurement errors analogous to those in analysts' biased forecasts. Therefore, these forecasts are not representative of investors' beliefs. The systematic measurement errors from using fundamental forecasts to proxy for market expectations occur because investors misweight the information in many firm-level variables when estimating future earnings, but fundamental forecasts are formed using the historically efficient weights on firm-level variables. Thus, we develop an alternative ex ante proxy for the market's expectations of future earnings (“the implied market forecast”) using the historical (and inefficient) weights, as reflected in stock returns, that the market places on firm-level variables. A trading strategy based on the implied market forecast error, which is measured as the difference between the implied market forecast and the fundamental forecast, generates excess returns of approximately 9 percent per year. These returns cannot be explained by investors' reliance on analysts' biased forecasts. Overall, our results reveal that market expectations differ from both fundamental forecasts and analysts' forecasts.     

Inter-vivos Transfers and Exchange

Most parents divide their bequests equally among their children, whereas inter-vivos transfers are usually unequal. We propose that exchange is better for inducing inter-vivos transfers than bequests. Inter-vivos transfers can be adjusted quickly to the amount of care, are less costly than writing a will, and can be kept secret from other family members and the public. The results from national longitudinal data show that, as expected, if a parent gives any inter-vivos transfers, she is more likely to give to children who provide informal care. Informal care has no effect on the equality of intended bequests.     

Earnings Announcements and Information Asymmetry: An Intra‐Day Analysis*

This paper examines the effect of earnings announcements on information asymmetry as perceived by specialists. We use changes in quoted bid‐ask spreads and depths (relative to the average value in the non‐announcement period) as proxies for changes in information asymmetry in the market. To our knowledge, we are the first to employ a model that captures the simultaneous nature of the specialists' choice of spreads and depths in reaction to earnings news. We provide evidence that spreads are wider and depths are smaller before the release of earnings announcements. We also find that changes to depths are greater for announcements of quarterly earnings than for announcements of annual earnings and changes to spreads persist longer into the post‐announcement period when announcements are made outside trading hours. These changes to spreads and depths persist when earnings announcements are made after trading hours.     

Upstream Intergenerational Transfers

This study analyzes upstream intergenerational transfers from middle-aged children to their elderly parents. We formulate a model in which the middle-aged child transfers both money and time to an elderly parent based on an altruistic motive. We examine substitution between financial transfers and time transfers using data from the Health and Retirement Study (HRS). Empirical results support the assumption that upstream transfers are motivated by altruism, particularly financial transfers. Parents financially worse off than their middle-aged children receive more money. They are more likely to live nearby if not coresident. Overall, the results for time transfers provide weaker support for our model than financial transfers. A child with a high wage tends to transfer money rather than time, suggesting that the two types of transfers are partial substitutes.     

对盈利预测信息披露制度的实证研究

对于新上市公司的盈利预测信息是否应该强制披露，一直是我国政府、投资者、上市公司非常关注的问题。当我国政府对上市公司初次发行股票的招股说明书中要求盈利预测的披露由强制性原则转为自愿性原则时，引起了有关各方的强烈反响。本文通过对自愿披露政策实施后初次上市公司披露盈利预测的比率等数据的搜集，来进一步对盈利预测披露制度进行分析。     

重大会计差错临时披露的盈余信息含量分析

文章以2004-2005年期间353家发生重大会计差错更正的A股上市公司为样本,运用Wilson（2005）的一期模型．检验了重大会计差错更正披露前后的季度盈余信息含量。研究发现,重大会计差错更正披露减少了此后季度盈余公告的信息含量,特别是重大会计差错更正披露前后季度盈余的ERC呈现u形;但是这种影响是暂时的。从重大会计差错更正披露后的第二季度到第四季度,盈余公告的信息含量很快恢复到重大会计差错更正披露前盈余公告信息含量;另外,投资者对重大会计差错更正临时披露信息是有反应的,核心盈余差错更正披露减少了此后四个季度的盈余公告信息含量。     

On Income Transfers and Equivalence Scales

This article focusses on the relations between equivalence scales and income transfers linked to household characteristics, also called demogrants. Since transfer payments have to be financed, the relation is analyzed in the framework of an optimal tax model. The – in a second-best sense – optimal demogrants and optimal marginal tax rate are characterised by their first-order conditions. Some general properties of the demogrant structure are derived and discussed. Finally, an adopted version of Stern's model for the numerical calculation of optimal taxes is used to obtain more explicit indications about how different factors affect the structure of demogrants and the marginal tax rate.     

Sibling Rivalry and Strategic Parental Transfers

This paper develops a noncooperative Nash model in which two siblings compete for their parents' financial transfers. Treating sibling rivalry as a “rent-seeking contest” and using a Tullock-Skaperdas contest success function, we derive the conditions under which more financial resources are transferred to the sibling with lower earnings. We find that parental transfers are compensatory and that the family as an institution serves as an “income equalizer.” Within a sequential game framework, we characterize the endogeneity of parental transfers and link it to parents' income, altruism, and children's supply of merit goods (e.g., parent-child companionship or child services). We show that merit goods are subject to a “moral hazard” problem from the parents' perspective.     

Taxes and Transfers 1997-2001

Significant change was made to both tax and benefits systemsduring the period 1997–2001. The impact of the changeswhich directly affect households is highly progressive, reflectinga significant increase in means-tested benefit levels. But theunderlying distribution of income has moved such that overallinequality of income has not fallen, and the government hasmade less progress on reducing poverty than it had hoped.     

Going-Concern Status,Earnings Persistence,and Informativeness of Earnings*

Abstract. Valuation theory recognizes that the relation between earnings innovations and changes in security valuation is increasing in the persistence of the earnings innovations. Analyses in this article reveal that the present value of revisions in expected future benefits is a function of the length of revision horizon, suggesting that earnings persistence is determined, in part, by an entity's going-concern status. These analyses predict an inverse relation between earnings informativeness and an entity's probability of termination. Drawing on a sample of quarterly earnings and returns data from more than 1,500 distinct firms for the period 1981–1990, a statistically significant inverse relation is documented between an entity's probability of termination and the informativeness of earnings—the latter measured as the coefficient from a regression of returns on earnings. Further empirical analyses reveal that this result is a pervasive economic phenomenon not attributable to extreme conditions or other prevailing explanations of earnings informativeness. This inference is robust to variations in research design, including measurement of earnings informativeness and of termination probability and alternative specifications of the relation between returns and earnings. Consequently, the evidence in this article is consistent with a fundamental role for an entity's going-concern status in determining the usefulness of earnings. Résumé. La théorie de l'évaluation reconnaît le fait que la relation entre les nouvelles informations relatives au bénéfice net et les changements dans l'évaluation des titres s'intensifie lorsque persistent lesdites informations. Les analyses réalisées par les auteurs révèlent que la valeur actualisée des rajustements dans les gains futurs espérés dépend de l'horizon du rajustement, ce qui donne à penser que la persistance du bénéfice net est en partie fonction de la continuité de l'exploitation de l'entreprise. Selon ces analyses, le potentiel informatif du bénéfice net devrait être en relation inverse avec la probabilité de fermeture de l'entité. En s'appuyant sur un échantillon de données trimestrielles relatives au bénéfice net et au rendement recueillies auprès de plus de 1500 entreprises distinctes pour la période 1981–1990, les auteurs observent une relation inverse statistiquement significative entre la probabilité de fermeture d'une entité et le potentiel informatif du bénéfice—ce dernier étant mesuré sous forme de coefficient, au moyen d'une régression des rendements sur les bénéfices. D'autres analyses empiriques révèlent que cette conclusion est un phénomène économique répandu qui n'est pas attribuable à des conditions extrêmes ou à d'autres explications prédominantes du potentiel informatif du bénéfice net. Cette inference résiste aux variations dans le plan de recherche, y compris la mesure du potentiel informatif du bénéfice net et de la probabilité de fermeture, et les autres caractéristiques possibles de la relation entre le rendement et le bénéfice. Les résultats obtenus confirment donc que la continuité de l'exploitation joue un rôle fondamental dans la détermination de l'utilité du bénéfice net.     

Earnings on the Information Technology Roller Coaster: Insight from Matched Employer-Employee Data

This article uses matched employer-employee data for the State of Georgia to examine workers' earnings experience through the information technology (IT) sector's employment boom of the mid-1990s and bust in the early 2000s. The results show that even after controlling for pre-boom individual characteristics, transitioning out of the IT sector to a non-IT industry generally resulted in a large wage penalty. However, IT service workers who transitioned to a non-IT industry still fared better than workers who took a non-IT employment path. For IT manufacturing workers, there is no benefit to having been touched by technology, likely because of the nontransferability of manufacturing experience to other industries.     

Insider Trading Restrictions and Insiders’ Supply of Information: Evidence from Earnings Smoothing

We exploit the setting of first‐time enforcement of insider trading laws to investigate the relationship between insider trading opportunities and insiders’ supply of information. Insider trading opportunities motivate insiders to reduce their supply of information by concealing firm performance, thereby increasing their information advantage over outsiders, resulting in higher insider trading profits. Using data from 40 countries over the 1988–2004 period, we find that reporting opacity, as captured by earnings smoothness, decreases significantly after the initial enforcement of insider trading laws in countries with strong legal institutions. The decrease in earnings smoothness is positively related to the strictness of insider trading laws. The decrease in earnings smoothness is also more pronounced for countries that have more persistent insider trading law enforcement and for countries that impose more severe penalties on insider trading cases. Further analyses show that the decrease in earnings smoothness following insider trading enforcement is concentrated among firms that are not closely held and among high‐growth firms. In addition to uncovering a channel through which insider trading restrictions affect the information environment, our evidence highlights the importance of country‐ and firm‐level governance structures in determining the consequences of insider trading restrictions.     

Corporate Governance and the Information Content of Earnings Announcements: A Cross‐Country Analysis

Using firm‐level data from 23 developed markets, we document a positive association between overall firm‐level governance quality and the informativeness of earnings announcements measured by abnormal stock return variance. This finding is robust after controlling for the potential endogeneity of firm‐level corporate governance. Further analyses reveal that firms with strong governance show little evidence of earnings management, appoint Big 4 auditing firms, and attract analyst following, implying a positive link between strong corporate governance and the information quality of earnings announcements. Finally, there is some evidence that the relation between firm‐level governance and market reactions around the announcements exists only in countries characterized by a transparent information environment and strong legal investor protection.