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This paper examines whether earnings levels predict future returns distinct from earnings changes. I find that the predictive ability of earnings levels is subsumed by and is not incremental to the predictive ability of earnings changes. Specifically, I find that trading strategies based on net income, operating profitability, and gross profitability do not earn significant abnormal returns after controlling for earnings changes. My evidence suggests that these anomalies are an artifact of post-earnings-announcement drift and the failure to properly control for earnings changes. History: Accepted by Mary Barth, accounting. Supplemental Material: Data are available at https://doi.org/10.1287/mnsc.2017.2838. Keywords: unexpected earnings * earnings levels * earnings changes * post-earnings-announcement drift * return predictability * asset pricing, 1. Introduction Research shows that net income, gross profitability, and operating profitability predict returns (Balakrishnan et al. 2010, Novy-Marx 2013, Ball et al. 2015). The ability of these variables, collectively [...]

We investigate why extreme positive earnings surprises occur and the consequences of these events. We posit that managers know before analysts when extremely good earnings news is developing, but can have incentives to allow the earnings news to surprise the market at the earnings announcement. In particular, managers can use an extreme positive earnings surprise to attract investor attention when they believe their stock is neglected and future performance is expected to be strong. Analysts, who must allocate scarce resources across many firms, can also be inattentive and miss signals that suggest good performance is going to be announced. Using various proxies for extreme positive earnings surprises, management expectations for future performance and desire for attention, and analyst neglect, we find evidence that an extreme positive earnings surprise is a predictable event. These findings are incremental to controlling for a firm's information environment, earnings volatility, and operating leverage. Finally, we show that extreme positive earnings surprises are a successful method for attracting attention, with significant increases in the number of institutional owners, the number of analysts, and trading volume during the subsequent three years. Keywords: accounting; economics; behavior; behavioral decision making; financial institutions; markets History: Received January 16, 2013; accepted June 2, 2015, by Mary Barth, accounting. Published online in Articles in Advance January 19, 2016., 1. Introduction This paper examines the causes and consequences of extreme positive earnings surprises. Instances where a firm's earnings far exceed the analyst consensus forecast are interesting because, on the [...]

This study examines the importance of saving during adolescence as one way of obtaining larger sums of money, and investigates differences between adolescents who choose to save and those who [...]

Nowadays, globalization of local firms is an important topic for every country. The international firms seem to have a high reputation, but does it really work for investors? Historically, several international firms that had a high reputation among investors have been involved accounting scandals before the exposure of terrible news. These cases raise investors' suspicion that international firms do not always have high quality accounting information. Investors should focus on some important indexes of earnings quality, helping themselves to decide the quality of companies' accounting statements which lead to a better decision. This paper tries to answer the following 3 questions: what kind of companies make overseas investment? Can overseas investment improve all types of earnings qualities? Do the legal systems and degree of development of the invested countries effect earnings qualities? In this paper, we hypothesize that firms under greater influence of common law and developed countries have higher earnings qualities. Then we use the propensity score matching model to control for differences in firms' characteristics between overseas investment Japanese firms and non-overseas investment Japanese firms. After that we examine the correlation between overseas investment and three types of earnings qualities (earnings management, value relevance of accounting information, and reporting conservatism), using two dimensions (quantity and percentage) to represent the extent of influence of common law countries and developed countries. We test out 6 hypotheses with the propensity score matching sample of 6,973 firm-year data for the year 2005 to 2014. Based on the results, we find that Japanese firms with lower advertisement expenditure, lower quick ratio, higher capital ratio, higher R&D expenditure, higher interest expense, higher intangible assets rate, higher ROA, and larger size, have a higher tendency to make overseas investment. In addition, we find that overseas investment can improve earnings quality by reducing earnings management risk. We also find that firms under greater influence of common law countries or developed countries have lower (higher) level of earnings management risk (value relevance). Lastly, we find that overseas investment can damage earning quality by impairing the reporting conservatism, but firms under greater influence of common law countries or developed countries have higher level of reporting conservatism. The findings of this study have implications not only for investors but also for security analysts, auditors, policy makers, and other accounting information users in enhancing their understanding of legal systems and degree of development differences, and their impact on earnings qualities. JEL Classifications: M41, D92, Q56, K42 Keywords: overseas investment, earnings quality, propensity score matching Corresponding Author's Email Address: gu.junjian@f.mbox.nagoya-u.ac.jp, INTRODUCTION Nowadays, globalization of local firms is an important topic for every country, as it is one of the main drivers of economic growth. As of 2015, around 1,100 listed [...]

We study earnings of individuals who exit entrepreneurship for paid employment. We find mean (median) positive rewards from entrepreneurship in subsequent paid employment relative to matched employees. Rewards are higher [...]

Transfer spending among English Premier League clubs has increased drastically since the inception of the league, often funded by extremely wealthy owners who began purchasing majority stakes in clubs. Using [...]

This paper examines the phenomenon of profit-increasing consumer exit and the related phenomenon of profit-decreasing consumer entry. We demonstrate that firms can be better off in shrinking markets and worse [...]

Although previous studies have examined the rewards available to individuals inside entrepreneurial firms, entrepreneurial experience may provide rewards that are independent of the entrepreneurial context. Building on human capital theory, this study provides theoretical explanations for the effects of experience at a startup on earnings across an individual's career and then examines these implications in the context of California's semiconductor industry. Comparing the career trajectories of employees who join start-ups with a matched control group of comparable workers without start-up experience, I perform a counterfactual analysis and find that start-up experience in this context has a persistent positive effect on earnings that extend outside the entrepreneurial environment. The results from the matched sample are consistent with the development and revelation of valuable general human capital through entrepreneurial experience and suggest that the rewards to entrepreneurship are not limited to just the rewards available inside entrepreneurial firms. Key words: start-ups; experience; human capital; compensation; careers; entrepreneurship; risk preferences History: Received February 1, 2010; accepted May 2, 2012, by Lee Fleming, entrepreneurship and innovation. Published online in Articles in Advance November 28, 2012., 1. Introduction A broad set of scholars has examined why some individuals become entrepreneurs and some do not (e.g., Blanchflower and Oswald 1998, Douglas and Shepherd 2000, Nicolaou et al. [...]

The manipulations of organizational earnings and indirect cost allocations by non-profit organizations are examined, taking into account the potential impact of the amounts that were externally raised. Problems between boards and management, and the effects of the difference in objectives between them were also considered. A comprehensive model of earnings manipulations is developed.

The bargaining between car dealers and the customer in a trade-in situation is examined. A negative correlation is found in the dealer's profit margin on the new car and on the trade-in.

A study was conducted to examine the joint effects of dividend propensity and voluntary disclosure on the relationship between current stock returns and future earnings. Findings indicate that the associations of voluntary disclosure and dividend propensity with share price anticipation of earnings are significant for high-growth firms.

Previous literature has shown that demand fluctuations affect the scope for tacit collusion. I study whether discount factor fluctuations can have similar effects. I find that collusion depends not only [...]

Empirical model of historical dependence of financial stability of businesses on returns and social influence is presented.

The influence of depreciation-type adjustments on accounting earnings division is examined by using computer simulation methodologies.

The study demonstrates how recent advances in the data envelopment analysis (DEA) of profit efficiency, and in combining DEA and stochastic frontier analysis (SFA) to measure producer performance, can be used to obtain a 'technically level playing-field' profit efficiency performance measure. A three-stage analysis is used to provide an empirical investigation of public-sector universities facing regulatory pressures to attain both profit efficiency and output quality. Stage one employs directional distance function analysis to decompose DEA profit efficiency measures into technical and allocative components. As these performance measures incorporate the impacts of managerial inefficiency, the operating environment and luck (statistical noise), stage two applies SFA to total (radial and non-radial) slacks to obtain a degree of disentanglement from the latter two impacts. The stage-two results are used to define a common environment and common luck scenario, thus permitting university producers' inputs to be adjusted so as to reflect operation within this more level playing-field scenario. Stage three recomputes the first-stage DEA for this scenario, to yield an (input-focused) 'technically level playing-field' measure of profit efficiency that unifies the regulatory financial audit and output-quality indicators in a single, best-practice-benchmarked, performance measure. JEL classification: C2; C61; D2; D78; G28; I2 Keywords: Profit efficiency; Activity analysis; Stochastic frontier analysis

This article examines match bias arising from earnings imputation. Wage equation parameters are estimated from mixed samples of workers reporting and not reporting earnings, the latter assigned earnings of donors. Regressions including attributes not used as imputation match criteria (e.g., union) are severely biased. Match bias also arises with attributes used as match criteria but matched imperfectly. Imperfect matching on schooling (age) flattens earnings profiles within education (age) groups and creates jumps across groups. Assuming conditional missing at random, a general analytic expression correcting match bias is derived and compared to alternatives. Reweighting a respondent-only sample proves an attractive approach.

Studies examining welfare-to-work program effectiveness present mixed and sometimes discrepant findings, partly due to research design, data, and methodological limitations. Using administrative data on Missouri and North Carolina welfare recipients, we substantially improve on past estimation approaches to identify the distinct effects of each state's welfare-to-work subprograms--assessment, job search assistance and job readiness training, and more intensive programs designed to augment human capital. More intensive training is associated with greater initial earnings losses but also greater long-run earnings gains. The negative program impacts we observe in quarters immediately following participation turn positive by the second year after participation.

A Report of a research, on the relation between internal communication and financial results of companies, is presented. Link between internal communication and organizational stability is also studied.

A study on relationship between earnings momentum and price momentum with relation macroeconomic activities is presented.

A study is conducted to examine the factors that govern the profitability of Korean banking sector. The study also evaluates market structure hypothesis and efficient structure hypothesis, to deduce their effect on profitability and performance of banks.

A study is conducted to analyze the impact of product characteristics on profitability of firm. This study analyze both traditional and e-commerce retail trading settings.

Fuzzy methods, which are used to examine profitable forecasting of manufacturing industries, are presented.

A study is conducted to analyze the role of board members in managing the earnings of a firm. The study clearly distinguishes the contributions of outside board members and insiders on the earnings management of United Kingdom companies.

A comparative analysis of earnings management practices adopted by Korean Stock Exchange (KSE) firms and KOSDAQ (a Korean version of the NASDAQ market) firms is presented.

A study is conducted to analyze the difference in earnings conservatism of UK companies, which have United States cross-listing and which don't have US cross-listing.

A study examining the direct relationship between lower variability of earnings and income smoothers' higher firm values, which is negated is presented.

A study on market's interpretations of changes in dividend policy of a business enterprise is presented. The study examines whether market associates changes in dividend payout with changes in earnings of the business enterprise.

The profitability of relative strength or momentum trading strategies, buying past strong performers and selling past weak performers, is re-examined. The results conclude that the magnitude of the abnormal returns associated with the trading strategies creates an illusion of profit opportunity even though none exists.

James A.Ohlson's model for analyzing the time series of residual earnings is discussed here. The relationships among accounting rules, unbiased accounting and non-zero net-present-value opportunities are noted.

This paper analyzes residual earnings' time-series behavior as it applies to positive net present value (NPV) opportunities ( rents). The Ohlson model is shown here to allow for positive NPV opportunities, in contradiction to some frequently made claims.

A study is presented on the influence of fiscal policy on investment and profit in different countries. The policy is found to have negative effect in public spending. Various types of taxes also found to have negative impact on profits.

ABSTRACT Herrmann et al. (2001) provide evidence in support of a pricing anomaly whereby the Japanese market underestimates the persistence of current changes in subsidiary earnings for future changes in [...]

Using data from the U.S. bicycle industry, we examine the relation among product variety, supply chain structure, and firm performance. Variety imposes two types of costs on a supply chain: production costs and market mediation costs. Production costs include, among other costs, the incremental fixed investments associated with providing additional product variants. Market mediation costs arise because of uncertainty in product demand created by variety. In the presence of demand uncertainty, precisely matching supply with demand is difficult. Market mediation costs include the variety-related inventory holding costs, product mark-down costs occurring when supply exceeds demand, and the costs of lost sales occurring when demand exceeds supply. We analyze product variety at the product attribute level, noting that the relative impact of variety on production and market mediation costs depends to a large extent on the attribute underlying the variety. That is, some types of variety incur high production costs and some types of variety incur high market mediation costs. We characterize supply chain structure by the degree to which production facilities are scale-efficient and by the distance of the production facility from the target market. We hypothesize that firms with scale-efficient production (i.e., high-volume firms) will offer types of variety associated with high production costs, and firms with local production will offer types of variety associated with high market mediation costs. This hypothesis implies that there is a coherent way to match product variety with supply chain structure. Empirical results suggest that firms which match supply chain structure to the type of product variety they offer outperform firms which fail to match such choices., 1. Introduction Using data from the U.S. bicycle industry, this paper examines two basic research questions: 1) How does product variety relate to supply chain structure? and 2) how does [...]

This article re-evaluates the authors' previous explanations for profitability momentum strategies. The authors also provide support for behavioral models that propose delayed overreactions to be the reason for momentum profits.

Utilizing recent developments in data envelopment analysis (DEA), this paper examines the performance of the top 55 U.S. commercial banks via a two-stage production process that separates profitability and marketability. Substantial performance inefficiency is uncovered in both dimensions. Relatively large banks exhibit better performance on profitability, whereas smaller banks tend to perform better with respect to marketability. New context-dependent performance measures are defined for profitability and marketability which employ a DEA stratification model and a DEA attractiveness measure. When combined with the original DEA measure, the context-dependent performance measure better characterizes the profitability and marketability of 55 U.S. commercial banks. The new approach identifies areas for improved bank performance over the two-stage production process. The effect of acquisition on efficiency and attractiveness is also examined. Key Words: Data Envelopment Analysis (DEA); Profitability; Marketability; Efficiency; Banks

We develop a framework for combining strategic benchmarking with efficiency benchmarking of the services offered by bank branches. In particular, a cascade of efficiency benchmarking models is developed guided by the service-profit chain. Three models based on the nonparametric technique of Data Envelopment Analysis are developed in order to implement the framework in a practical setting: (i) an operational efficiency model, (ii) a service quality efficiency model, and (iii) a profitability efficiency model. The use of the models is illustrated using data from the branches of a commercial bank. Empirical results indicate that we gain superior insights by analyzing simultaneously the design of operations together with the quality of the provided services and profitability, rather than by benchmarking these three dimensions separately. Relationships are also established between operational efficiency and profitability, and between operational efficiency and service quality. Key Words: Banking Services; DEA; Efficiency; Profitability; Service Quality

In this study we consider the linkage between productivity change and profit change. We develop an analytical framework in which profit change between one period and the next is decomposed into three sources: (i) a productivity change effect (which includes a technical change effect and an operating efficiency effect), (ii) an activity effect (which includes a product mix effect, a resource mix effect, and a scale effect), and (iii) a price effect. We then show how to quantify the contribution of each effect, using only observed prices and quantities of products and resources in the two periods. We illustrate our analytical decomposition of profit change with an empirical application to Spanish banking during the period 1987-1994. Key Words: Profits; Productivity; Banking