Management's Tone Change, Post Earnings Announcement Drift and Accruals PDF Download
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Author: Ronen Feldman
Publisher:
ISBN:
Category :
Languages : en
Pages : 65
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Book Description
This study explores whether the management discussion and analysis (MDamp;A) section of Forms 10-Q and 10-K has incremental information content beyond financial measures such as earnings surprises and accruals. It uses a classification scheme of words into positive and negative categories to measure the tone change in the MDamp;A section relative to prior periodic SEC filings. Our results indicate that short window market reactions around the SEC filing are significantly associated with the tone change of the MDamp;A section, even after controlling for accruals and earnings surprises. We show that management's tone change adds significantly to portfolio drift returns in the window of two days after the SEC filing date through one day after the subsequent quarter's preliminary earnings announcement, beyond financial information conveyed by accruals and earnings surprises. The drift returns are affected by the ability of the tone change signals to help predict the subsequent quarter's earnings surprise but cannot be completely attributed to this ability. We also find that the incremental information of management's tone change depends on the strength of the firm's information environment.
Author: Ronen Feldman
Publisher:
ISBN:
Category :
Languages : en
Pages : 65
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Book Description
This study explores whether the management discussion and analysis (MDamp;A) section of Forms 10-Q and 10-K has incremental information content beyond financial measures such as earnings surprises and accruals. It uses a classification scheme of words into positive and negative categories to measure the tone change in the MDamp;A section relative to prior periodic SEC filings. Our results indicate that short window market reactions around the SEC filing are significantly associated with the tone change of the MDamp;A section, even after controlling for accruals and earnings surprises. We show that management's tone change adds significantly to portfolio drift returns in the window of two days after the SEC filing date through one day after the subsequent quarter's preliminary earnings announcement, beyond financial information conveyed by accruals and earnings surprises. The drift returns are affected by the ability of the tone change signals to help predict the subsequent quarter's earnings surprise but cannot be completely attributed to this ability. We also find that the incremental information of management's tone change depends on the strength of the firm's information environment.
Author: Suresh Govindaraj
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
This study explores whether the Management Discussion and Analysis (MDamp;A) section of Form 10-Q and 10-K has incremental information content beyond financial measures such as earnings surprises, accruals and operating cash flows (OCF). It uses a well-established classification scheme of words into positive and negative categories to measure the tone change in a specific MDamp;A section as compared to those of the prior four filings. Our results indicate that short window market reactions around the SEC filing are significantly associated with the tone of the MDamp;A section, even after controlling for accruals, OCF and earnings surprises. We also show that the tone of the MDamp;A section adds significantly to portfolio drift returns in the window of two days after the SEC filing date through one day after the subsequent quarter s preliminary earnings announcement, beyond financial information conveyed by accruals, OCF and earnings surprises. The incremental information of tone change is larger the weaker is the firm's information environment.
Author: Henock Louis
Publisher:
ISBN:
Category :
Languages : en
Pages : 54
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Book Description
There is reliable evidence that managers smooth their reported earnings. If some firms manage earnings downwards (upwards) when they experience large positive (negative) earnings shocks and if investors have cognitive limits or are inattentive, then it is plausible that the post-earnings announcement drift could be related to earnings management. Consistent with this conjecture, we find that firms with large negative (positive) changes in operating cash flows manage their accruals substantially upwards (downwards). Most importantly, we find no evidence of a positive post-earnings announcement drift for those firms with large positive earnings changes that are least likely to have managed earnings downward or a negative post-earnings announcement drift for those firms with large negative earnings changes that are least likely to have managed earnings upward. That is, for these firms, there is no evidence of an underreaction to earnings changes. The underreaction is concentrated largely among those firms that are most likely to have smoothed their reported earnings, although this effect has weakened in recent years as investors started paying more attention to the anomalies and hedge funds were focusing on exploiting them. Finally, consistent with the earnings management hypothesis, we also find that the post-earnings announcement drift is generally associated with discretionary (or abnormal) accruals and not with nondiscretionary accruals. These findings reconcile PEAD with the (abnormal) accrual anomaly.
Author: Xuan Huang
Publisher:
ISBN: 9781124668666
Category :
Languages : en
Pages : 108
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Book Description
This dissertation includes 3 chapters, which are about text analysis of earnings press releases. Chapter 1 investigates whether managers exercise discretion over how they present in the headline of earnings press releases. I find that on average headline-salient firms have higher earnings or profitable earnings. Further analysis shows that announcement with salient headlines in the earnings press releases are associated with a stronger market reaction on the announcement day and less subsequent drift. These results suggest that headlines can be a tool for perception management. Chapter 2 and 3 investigate whether managers employ tone of earnings press releases for the purpose of perception management. Chapter 2 finds that managers of firms with high abnormal accruals and firms just meeting or beating earnings targets tend to use more positive words in earnings press releases to hype the discretionary accounting numbers. This evidence implies that managers strategically use tone as a complement to earnings management to manage investor perceptions. Chapter 3 explores whether managers use tone in earnings press releases to enhance quantitative financial reporting or to mislead investors. We estimate abnormal positive tone and finds abnormal positive tone is associated with lower future earnings and cash flows from operations, a higher incidence of meeting/beating three types of earnings thresholds, and a higher incidence of future earnings restatements. Tone is also abnormally positive before firms undertake major corporate transactions such as SEO or M & A. Earnings-announcement-date returns increase with abnormal positive tone, controlling for discretionary accruals. Furthermore, instead of PEAD, after earnings announcements with abnormal positive tone there is post-event return reversal.
Author: Carien van Mourik
Publisher: Routledge
ISBN: 1136243496
Category : Business & Economics
Languages : en
Pages : 495
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Book Description
Financial accounting, reporting and regulation is a vast subject area of huge global importance, with interest rising significantly in the light of the ongoing global financial crisis. The authors begin with a broad overview of the subject of accounting, setting the stage for a discussion on the theoretical and practical issues and debates regarding financial reporting, which are expanded on in the second part of the book. This includes how to define the reporting entity, recognition and measurement of the elements of financial statements, fair values in financial reporting and the costs and benefits of disclosure. The third part assesses the interest, need and theories behind the accounting, reporting and regulation industry, while parts four and five look at the institutional, social and economic aspects; with issues such as accounting for environmental management and, accounting regulation and financial reporting in Islamic countries, both issues of ever increasing importance. This authoritative Companion presents a broad overview of the state of these disciplines today, and will provide a comprehensive reference source for students and academics involved in accounting, regulation and reporting.
Author: Sabina Siebert
Publisher: Routledge
ISBN: 1351760920
Category : Business & Economics
Languages : en
Pages : 252
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Book Description
Management Research: European Perspectives brings together experts in the field to take stock of European management research and reflect on its distinctiveness. Building on a successful series of papers published in the European Management Journal, this book contains international contributions providing a range of scholarly perspectives on the reality of European management research. The state of management scholarship has recently been a topic of great interest, focusing on such matters as the role of universities versus businesses in shaping research agendas, the so-called ‘rigour–relevance’ debate, the use of measurements in quality assessment of research outputs, the role of journal rankings, and the merits of the journal review system. Missing, however, is any discussion of what, if anything, constitutes a European approach to management research, how does it differ from other styles used in the rest of the world and why is there a need for such distinctiveness? It has been noted that European management scholars have a lower success rate for publishing theoretical papers than their North American counterparts, which is surprising given that Europe has been the cradle of many generative intellectual traditions. European scholars may be the heirs to those traditions, but they are sometimes criticised for failing to channel this legacy into authoritative theoretical contributions in elite US-based management journals. This book provides insightful contributions to the debate and offers critical reflections on what European-based scholars have to offer the study of management.
Author: Kunio Ito
Publisher: Springer
ISBN: 4431547924
Category : Business & Economics
Languages : en
Pages : 337
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Book Description
Despite the globalization of accounting standards occurring through convergence to International Financial Reporting Standards, local accounting systems are deeply intertwined with each country’s unique institutions such as its corporate system, disclosure practices and enforcement mechanisms. First, this book empirically analyzes the effects of globalization and localization of accounting rules on corporate behavior such as earnings management, signaling, investment behavior and dividend payout policy. Second, the book unravels the economic consequences of disclosure based on the concept of self-disciplining enforcement such as management forecasts, environmental disclosures and risk disclosures by Japanese firms. This volume is a step forward in understanding the link between accounting and corporate behavior based on a new institutional accounting approach.
Author: Joshua Livnat
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
There is growing evidence in the finance literature that investor sentiment affects stock prices. We examine whether stock price reactions to earnings surprises and accruals vary systematically with the level of investor sentiment. Using quarterly drift tests and monthly trading strategy (calendar time) tests, we find evidence that holding extreme good news firms following pessimistic sentiment periods earns significantly higher abnormal returns than holding extreme good news firms following optimistic sentiment periods. Similarly, our results suggest that holding low accrual firms following pessimistic sentiment periods earns significantly higher abnormal returns than holding low accrual firms following optimistic sentiment periods. We also document that abnormal returns in the short-window around preliminary earnings announcements for extreme good news firms are significantly higher during periods of low sentiment than during periods of high sentiment. Overall, our results indicate that investor sentiment influences the source of excess returns from earnings-based trading strategies.
Author: Daniela Mancini
Publisher: Springer
ISBN: 3319264885
Category : Computers
Languages : en
Pages : 270
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Book Description
This book presents a collection of original research papers focused on the relationship between information technology and accounting and control models. The book discusses the importance of establishing a synergetic relationship between new information technologies (ERP, BI, web-based technology, data mining, XBRL, etc.) and new or renewed accounting models and tools (performance indicators, prevision and simulation models, accounting models for public administration, etc.) in order to enhance an organization’s capability to manage information and make valuable decisions. The search for these synergies takes place at all organizational levels: at a strategic level, in order to simulate and forecast behaviors and financial results at a management level, in order to innovate performance measurement and improve value creation at the operational level, in order to improve information quality and the efficiency of the information process. This book is particularly useful for IS and CFO managers and scholars, as it is based on a selection of the best papers – original, double blind reviewed contributions - presented to the Annual Conference of the Italian Chapter of AIS under the category “Accounting Information Systems”.
Author: Ying L. Becker
Publisher: CFA Institute Research Foundation
ISBN: 1944960457
Category : Business & Economics
Languages : en
Pages : 75
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Book Description
Quantitative equity management techniques are helping investors achieve more risk efficient and appropriate investment outcomes. Factor investing, vetted by decades of prior and current research, is growing quickly, particularly in in the form of smart-beta and ETF strategies. Dynamic factor-timing approaches, incorporating macroeconomic and investment conditions, are in the early stages but will likely thrive. A new generation of big data approaches are rendering quantitative equity analysis even more powerful and encompassing.
