Taking as given the discretionary accruals models that exist in the literature, we examine how the selection of peer firms affects the researcher’s ability to detect earnings management. Researchers commonly estimate accruals models in cross section, and define the peer set (the firms used to estimate the cross section) as all firms in the same industry. We challenge this view by examining whet...

This paper uses restrictions implied by cointegration to identify the permanent and transitory elements (the “trendÔand “cyclicalÔ) of household asset wealth. We focus our attention on a cointegrated system of three aggregate variables that are clearly central to the behavior of household spending: consumption, asset wealth and labor earnings. Because this cointegrated system is motivated by a ...

This paper uses Italian panel data from the private and public sectors and analyses earnings dynamics by applying the minimum distance estimator of Chamberlain (1984). We consider two main aspects of earnings careers. First, we estimate a measure of earnings growth heterogeneity, whereby quantifying to what extent the two sectors differ in the ability to differentiate remuneration of time-varyi...

This study focuses on the market reaction to information transfers from economically linked customers. In particular, I examine whether investors have limited attention with respect to the information contained in customer earnings announcements for suppliers. Using 1,083 unique customer-supplier relationships for the period 1983–2011, I find that the cumulative abnormal returns of a supplier s...

Between 1980 and the early 1990s the variability of labor earnings growth rates across the prime-age working population fell significantly. This decline and timing are consistent with other macro and micro observations about growth variability that are collectively referred to as the ‘‘Great Moderation.’’ The variability of earnings growth is negatively correlated with age at any point in time,...

Following Rosen [1981], superstar effects (earnings convex in quality and a few firms reaping a large share of market earnings) occur with imperfect substitution between sellers, low (and possibly declining) marginal cost of output, and marginal cost falling as quality increases. However, markets without such characteristics have superstar effects, and the main result from the superstar model —...

Because of transactions costs and investor/manager information asymmetries, internally generated funds should be less costly than funds raised by issuing shares. This suggests that as firms use more internal funds relative to external equity, their costs of equity capital will fall and the rate the market uses to discount unexpected earnings of such firms will be lower. We hypothesize that (1) ...

The methods discussed in this note are motivated by an interest in the time series properties of short panels. Such interest may arise for a variety of reasons. We may be interested in separating out permanent from transitory components of variation as in earnings mobility studies. In another type of applications, we may be able to test theories or identify policy parameters from the mapping be...

This paper examines the relation between the Seasoned Equity Offering (SEO) announcement effect and earnings timeliness. I predict that firms with greater earnings timeliness tend to have less information asymmetry between managers and investors, thus decreasing the magnitude of the price drop at the SEO announcement. As anticipated, I find that SEO negative announcement effect varies inversely...

We study individual male earnings dynamics over the life cycle using panel data on millions of U.S. workers. Using nonparametric methods, we first show that distribution changes exhibits substantial deviations from lognormality, such as negative skewness and very high kurtosis. Further, extent these nonnormalities varies significantly with age level, peaking around 50 between 70th 90th percenti...