In this paper we extend the standard human capital model with the probability of becoming unemployed and uncertainty about future earnings. Our analysis deviates from earlier human capital cum uncertainty models in assuming risk neutral decision-makers. This allows a straightforward comparison with the standard model and also facilitates calculations of unemployment and uncertainty accounted ra...

Pooled time-series, cross-sectional data on 110 Australian companies over the period 1992-1998 is employed to examine whether the trademarked variant of residual income known as economic value-added (EVA) is more highly associated with stock returns than more conventional accounting-based measures. These other measures of internal and external performance include earnings, net cash flow and res...

We examine the stock price reaction to announcements that firms are alleged to be doing fraudulent financial reporting or manipulating earnings, using a sample of firms cited by the Securities Exchange Commission (SEC) in its Accounting and Auditing Enforcement Releases (AAERs) during the time period 1985-2005. We find a total 14% drop in stock price over a three day window surrounding the anno...

Carbon monoxide (CO) poisoning is common in the United States, accounting for hundreds of deaths and thousands of emergency department visits annually. It is believed that most accidental CO poisoning is preventable through public education, warning labels on consumer products, and uniform use of residential CO alarms. However, cost effectiveness of these prevention strategies has not been demo...

Using pooled time-series, cross-sectional data on 110 Australian companies over the period 1992-1998 an examination is undertaken whether the trademarked variant of residual income known as economic value-added (or EVA) is more highly associated with stock returns than conventional accounting-based measures. The accountingbased measures of internal and external performance include earnings, net...

We evaluate the interpretations that can be made when examining the association between accounting information and long-window stock returns. We show that the common practice of regressing long-window stock returns on earnings components, and inferring from their coefficients the appropriateness of the components for recognition, can lead to ambiguous and mis-specified results. The problem aris...

Financial analysts’ earnings forecasts are a key determinant of stock prices and understanding how these forecasts evolve over time is important. This paper studies the asymmetric behavior of negative and positive values of analysts’ earnings revisions and links it to the conservatism principle of accounting. Using a new three-state mixture of log-normals model that accounts for differences in ...

We carefully construct measures of earnings forecast accuracy and recommendation profitability that enable us to examine the association between the qualities of these two key outputs of individual security analysts. We find that analysts with superior earnings forecasts issue significantly more profitable recommendations than those with less accurate forecasts. The average annual recommendatio...

A number of different models have been suggested for detecting earnings management but the linear regression-based model presented by Jones (1991) is the most frequently used. The underlying assumption with the Jones model is that earnings are managed through accounting accruals. Typically, the companies for which earnings management is studied are grouped based on their industries. It is thus ...