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To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1467-629X.2008.00292.x Byline: Anwer S. Ahmed (a), Minsup Song (b), Douglas E. Stevens (c) Keywords: Differential interpretation; Earnings announcements; Analyst forecasts Abstract: Abstract This study provides empirical evidence on factors that drive differential interpretation of earnings announcements. We document that Kandel and Pearson's forecast measures of differential interpretation are decreasing in proxies for earnings quality and pre-announcement information quality. This evidence yields new and useful insights regarding which earnings announcements are less likely to generate newfound disagreement among analysts and investors. Recent research suggests that investor disagreement can increase investment risk, increase the cost of capital, and cause stock prices to deviate from fundamental value. Therefore, our results support prior intuition that increasing the quality of earnings and pre-announcement information can improve the efficiency of capital markets. Author Affiliation: (a)Mays Business School, Texas A&M University, College Station, 77843-4113, USA (b)College of Business Administration, Sogang University, Seoul, 121-742, South Korea (c)College of Business, Florida State University, Tallahassee, 32306-1110, USA Article History: Received 26 June 2008; accepted 8 November 2008 by Robert Faff (Editor).

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jacceco.2007.01.005 Byline: Anwer S. Ahmed (a), Scott Duellman (b) Keywords: Accounting conservatism; Board independence; Outside directors; Corporate governance; Agency costs Abstract: Using three different measures of conservatism, we document that (i) the percentage of inside directors is negatively related to conservatism, and (ii) the percentage of outside directors' shareholdings is positively related to conservatism. Our results hold after controlling for industry, firm size, leverage, growth opportunities, institutional ownership, inside director ownership, and unobservable firm characteristics that are stable over time. Overall, the evidence is consistent with accounting conservatism assisting directors in reducing agency costs of firms. Author Affiliation: (a) Texas A & M University, Texas, USA (b) Department of Accounting, School of Management, State University of New York at Binghamton, Binghamton, NY 13902, USA Article Note: (footnote) [star] We thank Bill Baber, Bill Brown, Ravi Dharwadkar, Randy Elder, David Harris, Sok-Hyon Kang, Krishna Kumar, Gerry Lobo, P.K. Sen, Doug Stevens, Ross Watts (the editor), an anonymous referee, and workshop participants at the University of Cincinnati, University of New Hampshire, George Washington University, Syracuse University, and the 2006 AAA annual meeting for helpful comments.

Using both a market-based and an accrual-based measure of conservatism, we find that firms facing more severe conflicts over dividend policy tend to use more conservative accounting. Furthermore, we document that accounting conservatism is associated with a lower cost of debt after controlling for other determinants of firms' debt costs. Our collective evidence is consistent with the notion that accounting conservatism plays an important role in mitigating bondholder-shareholder conflicts over dividend policy, and in reducing firms' debt costs. Keywords: accounting conservatism; dividend policy conflicts; cost of debt. Data Availability: All data used in the study are publicly available from the sources identified in the text., I. INTRODUCTION Watts (1993) suggests that conservatism likely evolved from the contracting role of accounting. (1) He argues that accounting conservatism helps avoid inappropriate distributions to claim holders. Consistent with [...]

The regulatory changes in regards to bank capital, capital, and earnings management are investigated and discussed. Loan loss provisions in regard to capital and earnings are described and detailed, also.

The findings of previous studies indicating a negligible impact of unrealized gains/losses (URGL) and a negative effect of realized gains/losses (SGL) on bank stock returns are challenged. It is argued that these results may be incorrect because they did not take into account the changes in value of other net assets caused by interest rate fluctuations. It is demonstrated that URGL and SGL positively affect back returns in normal periods in a significant way.