scholarly journals Attention to dividends, inattention to earnings?

2021 ◽  
Author(s):  
Charles G. Ham ◽  
Zachary R. Kaplan ◽  
Steven Utke
Keyword(s):  
Earnings Management ◽  
Trading Volume ◽  
Accounting Information ◽  
Analyst Forecasts ◽  
Firm Valuation ◽  
Earnings Response Coefficients ◽  
Earnings Information ◽  
Earnings Response ◽  
Cash Reserves ◽  
Supply Information

AbstractWe examine whether dividends serve as substitutes or complements to accounting information in firm valuation. Consistent with dividends substituting for earnings information, we find that dividend paying firms have 11%–15% lower earnings response coefficients (ERCs) than non-payers. We find more substitution when the dividend provides a stronger signal of permanent earnings: when the firm is less likely to cut the dividend, when the firm is likely to fund the dividend out of earnings rather than cash reserves, or when the dividend is larger. We then show that dividend payers have lower absolute returns, less trading volume, and fewer analyst forecasts at the earnings announcement (EA), suggesting that dividend payers attract less attention to their less informative EAs. Finally, we show that the lower EA attention translates into less earnings management and fewer earnings-related disclosures for dividend payers relative to non-payers. Collectively, this evidence suggests that dividends supply information about permanent earnings and, although costly, could be an efficient way for some firms to satisfy investors’ demand for earnings information.

scholarly journals Has The Informativeness Of Accounting Numbers Improved After Accounting Regulations In Korea?

2011 ◽  
Vol 8 (7) ◽  
Author(s):  
Sun-A Kang ◽  
Sung-Bin Chun
Keyword(s):  
Earnings Management ◽  
Accounting Information ◽  
Cash Flows ◽  
Earnings Response Coefficients ◽  
Listed Firms ◽  
Accounting Numbers ◽  
Before And After ◽  
Earnings Response ◽  
Accounting Control ◽  
Internal Accounting

This paper aims to examine whether the level of Earnings Management (EM) and informativeness of accounting information change after the enforcement of Internal Accounting Control System (IACS) Standards established by the Korea Listed Firms Association, introduced as one of the Accounting Reforms. We test the effectiveness of IACS standards using samples of listed large firms that were required to adopt IACS Standards from 2006 and of listed small and medium firms that did not have to adopt IACS Standards to implement IACS as non-adopters. We use absolute values of discretionary accruals as proxies for EM estimated by three models: (1) the Modified Jones model, (2) the Performance Matched model, and (3) the Forward Looking model. We test the hypothesis that there are changes in the level of earnings management before and after the enforcement of IACS Standards for adopters using multivariate regression models. We also test the change in the informativeness of accounting information before and after the enforcement of IACS Standards using earnings response coefficients (ERC) between earnings and returns for both samples. It was found that the level of EM is significantly reduced and the level of informativeness is improved after the enforcement of IACS Standards for adopters, while the levels of EM and informativeness are not significantly changed for not-adopters. Other control variables, such as cash flows from operations, size, debt ratio, and trends variables also turned out to be significant in explaining EM. The results imply that the reliability and the transparency of Korean firms' financial statements were improved by the enforcement of IACS Standards as they reduce earnings management. Also the informativeness of accounting numbers was increased after the enforcement of IACS Standards. This paper provides initial empirical evidence on the effectiveness of IACS Standards enforced in 2006.

scholarly journals Earnings Informativeness And Ownership Structure In Japan

2011 ◽  
Vol 25 (1) ◽  
Author(s):  
Wikil Kwak ◽  
Jack Armitage
Keyword(s):  
Ownership Structure ◽  
Leverage Ratio ◽  
Earnings Response Coefficients ◽  
Ownership Structures ◽  
Earnings Information ◽  
Japanese Firms ◽  
Earnings Response ◽  
Institutional Shareholders ◽  
Recession Period

This paper investigates the association between institutional ownership structures and the quality of earnings information via changes in earnings response coefficients for a sample of Japanese firms during 1990-1998. From these results we can predict that the greater the percentage of institutional shareholders in Japan, the better the quality of earnings information and the higher the foreign ownership; the quality of earnings information is better during Japan’s recession period of 1990-1998. However, keiretsu membership percentage is not important for the quality of earnings information in Japan even though firm size, leverage ratio, and growth are important factors in earnings information in Japan.

Pengaruh Interaksi Corporate Social Responsibility dan likuiditas Saham Terhadap Earnings Response Coeficient Studi pada Perusahaan Pertambangan di Bursa Efek Indonesia

JEMAP ◽  
2019 ◽  
Vol 1 (2) ◽  
pp. 146
Author(s):  
Maria Yosaphat Dedi Haryanto
Keyword(s):  
Social Responsibility ◽  
Trading Volume ◽  
Stock Exchange ◽  
Alternative Hypothesis ◽  
Added Value ◽  
Stock Trading ◽  
Earnings Response Coefficient ◽  
Earnings Information ◽  
Earnings Response

This study aims to prove that interaction between CSR and stock’s liquidity will affect earnings response coeficient. Earnings response coefficient is a measure of the magnitude of market reaction to information about the company as reflected by the release of financial statements, especially profit information. So it can be said ERC can reflect the quality of profit information. Reputation of a company becomes a factor that supports the quality of profit information. Corporated social responsibility is a form of corporate concern to the environment that can show the added value of the company in the eyes of investors. Meanwhile, stock liquidity is the amount of stock trading volume in the stock exchange that can give an idea of how big the market or investors have interest in these shares. This study uses a sample of mining companies listed on the Indonesia Stock Exchange and data analysis using Moderated Regression Analysis (MRA). The result of the research proves that alternative hypothesis is accepted. So it can be concluded that the interaction of corporated social responsibility with stock trading liquidity affects the quality of earnings information.

Accounting Estimation Disclosures and Firm Valuation in the Property-Casualty Insurance Industry

1997 ◽  
Vol 12 (3) ◽  
pp. 257-281 ◽  
Author(s):  
Joseph H. Anthony ◽  
Kathy R. Petroni
Keyword(s):  
Stock Returns ◽  
Insurance Industry ◽  
Estimation Error ◽  
Firm Valuation ◽  
Estimation Errors ◽  
Accounting Earnings ◽  
Earnings Response Coefficients ◽  
Future Earnings ◽  
Earnings Response ◽  
Property Casualty

Accounting earnings are subject to estimation error. Under GAAP, corrections to estimates are included in current and future earnings, but characteristics of previous errors are not disclosed. An exception exists for property-casualty insurers. SEC mandated disclosures reveal errors in previous claim expense estimates as well as the correction for those errors in current earnings. An important issue is whether these detailed disclosures are value-relevant. We examine the information content of the SEC disclosures by testing their valuation implications. We investigate whether estimation errors in previous earnings influence the reflection of current earnings in price. Results suggest that investors use these disclosures in valuation decisions. Insurers with more variable estimation errors have smaller earnings response coefficients. Apparently investors assume that the precision of previous earnings is indicative of the precision in current earnings. We also find that stock returns are associated with revisions of previous estimations included in current earnings. Our research has implications for regulation, suggesting that similar disclosures should be considered for other estimates.

The Effect of Analyst Forecasts during Earnings Announcements on Investor Responses to Reported Earnings

2016 ◽  
Vol 92 (3) ◽  
pp. 239-263 ◽  
Author(s):  
Gerald J. Lobo ◽  
Minsup Song ◽  
Mary Harris Stanford
Keyword(s):  
Negative Impact ◽  
Earnings Announcements ◽  
Analyst Forecasts ◽  
Analyst Forecast ◽  
Management Forecasts ◽  
Cross Sectional ◽  
Earnings Response Coefficients ◽  
Forecast Revisions ◽  
Unexpected Earnings ◽  
Earnings Response

ABSTRACT Despite the increased frequency of analyst forecasts during earnings announcements, empirical evidence on the interaction between the information in the earnings announcement and these forecasts is limited. We examine the implications of reinforcing and contradicting analyst forecast revisions issued during earnings announcements (days 0 and +1) on the market response to unexpected earnings. We classify forecast revisions as reinforcing (contradicting) when the sign of analyst forecast revisions agrees (disagrees) with the sign of unexpected earnings. We document larger (smaller) earnings response coefficients for announcements accompanied by reinforcing (contradicting) analyst forecast revisions. Analyses of management forecasts suggest that analyst revisions and management forecasts convey complementary information. Cross-sectional tests show that investors react more to earnings announcements accompanied by analyst forecast revisions when there is greater consensus among analysts (lower dispersion) and that better earnings quality (higher persistence) mitigates the negative impact of contradictory analyst forecast revisions. JEL Classifications: D82; G29; M41.

scholarly journals PRINCIPLES OF PRUDENTIAL IN IFRS FINANCIAL STATEMENTS AND ITS EFFECT ON EARNINGS RESPONSE COEFFICIENT AND PROFIT MANAGEMENT

2017 ◽  
Vol 16 (2) ◽  
Author(s):  
Arna Suryani ◽  
Eva Herianti
Keyword(s):  
Earnings Management ◽  
Precautionary Principle ◽  
Financial Statements ◽  
Significant Positive Effect ◽  
Earnings Response Coefficients ◽  
Earnings Response Coefficient ◽  
Response Coefficient ◽  
Earnings Response ◽  
Positive Effect

<p>The purpose of this study is to determine the effect of prudential principle of financial statements in IFRS on earnings response coefficients and profit management of manufakturing companies. This study uses analytical methods Partial Least Square (PLS) through analisys software called Smart PLS 2.0 M3. The object of this research is manufacturing companies in Indonesia with a total of 57 analysis unit manufacturing company during the period from 2013 to 2015.</p><p>Based on the results of the study, it is obtained the following findings: the precautionary of financial principle is proven to have a significant positive effect on the earnings response coefficient. The prudential financial principle is proven to have significant harmful impact on earnings.Manajemen is proved to have significant positive effect on banking principles prudential reports. Then, precautionary principle financial statements have greater direct influence on earnings response coefficients.</p><p>This study has implications both theoretically and manajerial. The theoretical implication, the study makes an important contribution in the development of the theory of the precautionary principle financial statements, earnings response coefficients and earnings management. Managerial implications, this research has implications for users of financial statements in taking decision that is not only based on accounting figures, but also need to look at the quality of earnings presented. The precautionary principle financial statements required to reduce opportunistic earnings management so as to improve the quality of earnings and designated by increased earnings response coefficients.<br /> <br /> <strong>Keywords</strong>: Principle of Prudence, Financial Statement, Earnings Response Coefficient, Profit Management</p>

The Effect of Voluntary Disclosure and Preemptive Preannouncements on Earnings Response Coefficients (ERC) When Firms Manage Earnings

2003 ◽  
Vol 18 (3) ◽  
pp. 379-409 ◽  
Author(s):  
Joshua Ronen ◽  
Tavy Ronen ◽  
Varda (Lewinstein) Yaari
Keyword(s):  
Earnings Management ◽  
Voluntary Disclosure ◽  
Bad News ◽  
Good News ◽  
Earnings Response Coefficients ◽  
Earnings Response Coefficient ◽  
Earnings Surprise ◽  
Response Coefficient ◽  
Earnings Response ◽  
Disclosure Strategy

We study analytically the effect of preliminary voluntary disclosure and preemptive preannouncement on the slope of the regression of returns on earnings surprise—the earnings response coefficient (ERC). When firms do not manage earnings, additional disclosure has no effect, and the ERC is proportional to price/permanent earnings ratio. If they manage earnings by attempting to inflate them, the response to (100% credible) negative earnings surprise is stronger than the response to (less than 100% credible) positive surprise. To avert litigation, firms that manage earnings adopt a partial voluntary disclosure strategy—either public revelation of good news and withholding bad news, or public revelation of bad news and withholding good news. Voluntary disclosure affects ERC on positive earnings surprise only, depending on what the firm reveals: the good- news revealing ERC (GRC) is higher than the bad-news revealing ERC (BRC), because good news enhances the credibility of the positive earnings surprise, even though the market discounts good news. Furthermore, preemptive pre-announcements improve ERC accuracy by narrowing the scope of earnings management.

PENGARUH EARNINGS MANAGEMENT TERHADAP EARNINGS QUALITY

2010 ◽  
Author(s):  
Pupun Tri Wahyuni ◽  
Resti Yulistia Muslim
Keyword(s):  
Earnings Management ◽  
Sampling Method ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Manufacturing Companies ◽  
Financial Report ◽  
Earnings Response Coefficient ◽  
Discretionary Accrual ◽  
Response Coefficient ◽  
Earnings Response

This research objective is to axamine empirically the influence of earnings management on earnings quality. The study motivated by the controversy of previous study about earnings management and earnings quality. Earnings management was measured by Discretionary Accrual and earnings quality was measured by Earnings Response Coefficient (ERC). The units were 128 (16x8) Quartal financial report in manufacturing companies listed in the Jakarta Stock Exchange, started from the year 2005 up to 2006. The data was collected using purposive sampling method. Statistical method used to test the hypotheses was multiple regressions. The result of the research showed that: the influence of earnings management on earnings quality was negative, sig 0.049. It means that the lower earnings management will be followed by higher earnings quality. This study supported the result of Fetham and Pae (2000), Nelson et al. (2000), Scott (2000), Lobo and Zhou (2001), also Teixeira (2002), Pudjiastuti (2006). 

Who Did the Audit? Audit Quality and Disclosures of Other Audit Participants in PCAOB Filings

2014 ◽  
Vol 90 (5) ◽  
pp. 1939-1967 ◽  
Author(s):  
Carol Callaway Dee ◽  
Ayalew Lulseged ◽  
Tianming Zhang
Keyword(s):  
Audit Quality ◽  
Market Reaction ◽  
Audit Fees ◽  
Discretionary Accruals ◽  
Multivariate Model ◽  
Significant Decline ◽  
Earnings Response Coefficients ◽  
Absolute Value ◽  
Earnings Response ◽  
First Time

ABSTRACT We empirically test whether audit quality is affected when part of an SEC issuer's audit is outsourced to auditors other than the principal auditor (“participating auditors”). We find a significantly negative market reaction and a significant decline in earnings response coefficients (ERCs) for experimental issuers disclosed for the first time as having participating auditors involved in their audits. However, we find no market reaction and no decline in ERCs for a matching sample of issuers that are not disclosed as using participating auditors, nor for issuers disclosed for the second or third time as using participating auditors. We also find actual audit quality as measured by absolute value of performance-matched discretionary accruals is lower for the experimental issuers, although we find no difference in audit fees paid by the experimental and matching issuers in a multivariate model. Our findings suggest that the PCAOB's proposed rule requiring disclosure of the use of other auditors in addition to the principal auditor would provide information useful to investors in assessing audit quality for SEC issuers.

Sign in / Sign up

Export Citation Format

Share Document