GAAP versus The Street: An Empirical Assessment of Two Alternative Definitions of Earnings

Managers, security analysts, investors, and the press rely increasingly on modified definitions of GAAP net income, known by such names as "operating" and "pro forma" earnings. We document this phenomenon and discuss competing explanations for the recent rise in the use of such modified earnings numbers and implications for the interpretation of related accounting research. Our results show that over the past 20 years there has been a dramatic increase in the frequency and magnitude of cases where "GAAP" and "Street" earnings differ. Further, there is a very strong bias toward the reporting of a Street earnings number that exceeds the GAAP earnings number. We also show that the market response to the Street earnings number has displaced GAAP earnings as a primary determinant of stock prices. Finally, through an analysis of earnings releases, we show that management has taken a proactive role in defining and emphasizing the Street number when communicating to analysts and investors.     

Hungarian Privatisation Strategy and Financial Performance of Privatised Companies

This paper examines Hungarian privatisation strategy and the financial performance of privatised enterprises. The results suggest that Hungary has preferred privatisation by direct sales by a considerable margin, but has recently shifted towards share issues. Both types of sale have predominantly been gradual. Subsequent sales, however, confirm the government's intention to sell previously retained shares. An analysis of IPOs during 1990–1998 shows positive initial returns on Privatisation Initial Public Offers (PIPOs) and greater underpricing than for other IPOs. The long term returns of PIPOs are positive and they outperform other IPOs in all periods after the listing.     

The Effect of Probability Distribution Functions of Economic Life on Retirement Alternatives

Economic analysis, supported by computer hardware and software, can easily overwhelm a decision maker with data. However, this data can be organized in a readily understandable way using well-designed graphs. Some simple guidelines suggest substantial improvements over available examples from papers and textbooks. Although these graphs and sensitivity analyses are useful in many quantitative problems, the long-range focus of engineering economy and its concomitant uncertainty dramatically increase their value.