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TERRY COLLEGE OF BUSINESS THE UNIVERSITY OF GEORGIA

ACCT9120, Spring 2008

CAPITAL MARKETS-BASED RESEARCH IN FINANCIAL ACCOUNTING

Professor Steve Baginski Office: 228 Brooks Hall Office Hours: by appointment Phone: 542-3608 Email: baginski@terry.uga.edu OBJECTIVE The primary objective of this course is to enable you to develop research skills that are necessary to investigate research questions involving financial accounting information and the capital markets. These research skills include a) the ability to identify research questions of interest to academics, practitioners, managers, and policy makers; b) the ability to design tests from which defendable inferences may be drawn about the relationships specified in the research questions; and c) the ability to successfully argue that your research has changed beliefs by placing your findings in the context of prior research. STRUCTURE The course is structured in seminar format. The primary tools of the course are reading, writing, lecture, and discussion of the capital markets-based accounting research literature. Students are expected to thoroughly read the assigned readings before class and to be prepared to discuss the readings in detail. EVALUATION Students will be evaluated as follows: Class Participation 33.3% Research Proposal 33.3% Final Exam 33.3% Class Participation, including presentation and discussion of assigned readings Each class involves assigned readings. You should read thoroughly the assigned readings before each class and be prepared to discuss the readings in detail during class. To organize and structure our approach to participation, everyone is expected to participate fully in the discussion of all of the assigned readings. Evaluation will be based on your contribution to the discussion of the readings each day. Your contribution each day should consist of comments and questions about each paper assigned for that day, including making links to other papers in the course. Daily participation in discussions will be judged on the basis of quality of comments, questions and ideas, and not simply on the quantity of comments. There is much to be gained by rigorously challenging the ideas in the assigned readings and the ideas that will be put forth in class. Class discussion should be demanding and lively. To guide your thinking about the paper, identify:

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• The research question (WHAT) • WHY the study is important • HOW the question is being addressed (i.e., the method which includes sampling, variable definitions,

and statistical model) • The key findings • Ways to improve or extend the study

Research Proposal You are required to design an empirical capital markets-based study of an accounting research question. By the end of the course you should expect to have written an empirical research proposal, complete with motivation, literature review, hypotheses, and the design of the data analysis. These papers will serve as the basis for the final exam. Final Exam A final exam will be administered at the end of the course. The exam will be a take-home referee report on one or more of the research proposals written by your classmates. Readings A list of readings for class discussion appear on the following pages. Readings to reference as we proceed through the course (I will suggest when you should read these as we proceed through the course): Schipper, K., “Academic Accounting Research and the Standard Setting Process,” Accounting Horizons (December 1994), 61-73. Kothari, S.P., “Capital Markets Research in Accounting,” Journal of Accounting and Economics, (September 2001), pp. 105-232.

Lee, C., “Market Efficiency and Accounting Research: A Discussion of ‘Capital Market Research in Accounting’ by S.P. Kothari,” Journal of Accounting and Economics, (September 2001), pp. 233-253. Watts, R., “Conservatism in Accounting Part I: Explanations and Implications,” Accounting Horizons (September 2003), 189-205. Watts, R., “Conservatism in Accounting Part II: Evidence and Research Opportunities,” Accounting Horizons (December 2003), 287-301.

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READINGS LIST FOR CLASS DISCUSSION

(Readings marked with an asterisk (*) represent the main focus of class discussion. You should also spend enough time with the other readings to understand the motivation, basic design, and findings of the

study. I will provide guidance on these other papers as we proceed through the course.)

PART I: EARNINGS AND ACCOUNTING NUMBERS AS INFORMATION

Session 1: In the beginning…. *Ball, R. and P. Brown, “An Empirical Evaluation of Accounting Income Numbers,” Journal of Accounting Research (Autumn 1968): 159-178. *Beaver, W., “The Information Content of Annual Earnings Announcements,” Journal of Accounting Research (Supplement 1968): 67-92. Beaver, W., R. Clarke, and W. Wright, "The Association between Unsystematic Security Returns and the Magnitude of Earnings Forecast Errors," Journal of Accounting Research. (Autumn 1979), 316-40. Sharpe, W., “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk,” Journal of Finance (September 1964), 425-442. Fama, E. and K. French, “Common Risk Factors in the Returns on Stocks and Bonds,” Journal of Financial Economics (February 1993), 3-56. Session 2: Methodological Issues

*Brown, S., and J. Warner, “Using Daily Stock Returns: The Case of Event Studies,” Journal of Financial Economics (March 1985) 3-31. *Bernard, V. “Cross-Sectional Dependence and Problems in Inference in Market-based Accounting Research,” Journal of Accounting Research (Spring 1987): 1-48. Chandra, R., S. Moriarity, and G. Willinger, “A Reexamination of the Power of Alternative Return-Generating Models and the Effect of Accounting for Cross-Sectional Dependencies in Event Studies,” Journal of Accounting Research (Autumn 1990), 398-408. Rohrbach, K., and R. Chandra. “The Power of Beaver's U Against a Variance Increase in Market Model Residuals. Journal of Accounting Research 27 (Spring 1989): 145-155. Subramaniam, C. “Detecting Information Content of Corporate Announcements Using Variance Increases: A Methodological Study.” Journal of Accounting, Auditing, and Finance (Fall 1995): 415- 430.

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Session 3: Methodological Issues (continued) *Kothari, S.P., and J. Zimmerman, “Price versus Return Models,” Journal of Accounting and Economics (1995): 155-192. Barth, M., and S. Kallapur, “The Effects of Cross-Sectional Scale Differences on Regression Results in Empirical Accounting Research,” Contemporary Accounting Research (1996): 528-567. Prabhala, N., “Conditional Methods in Event Studies and an Equilibrium Justification for Standard Event-Study Procedures,” Review of Financial Studies (Spring 1997), 1-38. *Kothari, S.P. and J.B. Warner, “Econometrics of Event Studies,” working paper, 2004. Session 4: Volume analysis *Bamber, L., "The Information Content of Annual Earnings Announcements: A Trading Volume Approach." Journal of Accounting Research, (Spring 1986), pp. 40-56. *Bamber, L. S., and Y. S. Cheon. Differential price and volume reactions to accounting earnings announcements. The Accounting Review 70 (July 1995): 417-441. Bhattacharya, N., E. Black, T. Christensen, and R. Mergenthaler. “Who trades on pro forma earnings information?” The Accounting Review (May 2007): 581-620. Other approaches to identifying “information content” Cox, J., S. Ross, and M. Rubinstein, "Option Pricing: A Simplified Approach," Journal of Financial Economics (September 1979), 229-63. Patell, J., and M. Wolfson, "Anticipated Information Releases Reflected in Call Option Prices," Journal of Accounting & Economics (August 1979), 117-40. Patell, J. and M. Wolfson, “The Ex Ante and Ex Post Price Effects of Quarterly Earnings Announcements Reflected in Option and Stock Prices,” Journal of Accounting Research (Autumn 1981), 434-458. Methodological issues in volume studies: Ajinkya, B., and P. Jain. “The Behavior of Daily Stock Market Trading Volume.” Journal of Accounting and Economics 11 (November 1989): 331-359. Cready, W., and R. Ramanan. “The Power of Tests Employing Log-Transformed Volume in Detecting Abnormal Trading. Journal of Accounting and Economics 14 (June 1991): 203-214. Cready, W., and R. Ramanan. “Detecting Trading Response Using Transactions-Based Research Designs. Review of Quantitative Finance and Accounting 5 (June 1995): 203-221.

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Creedy, W. and D. Hurtt, “Assessing Investor Response to Information Events Using Return and Volume Metrics,” The Accounting Review, (October 2002), pp.891-910. Session 5: Determinants of the association between earnings and returns Lipe, R., “The Information Contained in the Components of Earnings,” Journal of Accounting Research (Supplement 1986): 37-64. *Collins, D. and Kothari, S.P., “An Analysis of Intertemporal and Cross-Sectional Determinants for Earnings Response Coefficients,” Journal of Accounting and Economics (Vol. 11, 1989): 143-181. *Hayn, C., “The Information Content of Losses,” Journal of Accounting and Economics (September 1995), pp. 125-153. Related methodological issues: Cready, W., D. Hurtt, and J. Seida, “Applying Reverse Regression Techniques in Earnings-Returns Analyses, Journal of Accounting & Economics, (October 2000), 227-240. Teets, W. and C. Wasley, “Estimating Earnings Response Coefficients: Pooled versus Firm-Specific Models,” Journal of Accounting Economics (June 1996), 279-295. Lipe, R., L. Bryant and S. Widener, “Do Nonlinearity, Firm-Specific Coefficients, and Losses Represent Distinct Factors in the Relation between Stock Returns and Accounting Earnings?” Journal of Accounting & Economics (May 1998), 195-214. Session 6: Determinants of the association between earnings and returns (continued) *Easton, P., T. Harris and J. Ohlson, “Aggregate Accounting Earnings Can Explain Most of Security Returns,” Journal of Accounting and Economics (Vol. 15, 1992): 119-142. *Ali, A. and P. Zarowin, “The Role of Earnings Levels in Annual Earnings-Returns Studies,” Journal of Accounting Research (1992): 286-296. *Freeman, R. and S. Tse, , “A Non-linear Model of Security Price Responses to Unexpected Earnings,” Journal of Accounting Research (1992): 185-209. Session 7: Determinants of the association between earnings and returns: Timing issues *Kothari, S.P., and R. Sloan, “Information in Prices about Future Earnings: Implications for Earnings Response Coefficients,” Journal of Accounting and Economics (Vol. 15, 1992): 143-171. *Basu, S., “The Conservatism Principle and the Asymmetric Timeliness of Earnings,” Journal of Accounting and Economics (Vol. 24, 1997): 3-37.

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Session 8: Intertemporal Change in Value Relevance Collins, D., E. Maydew and I. Weiss, “Changes in the Value-Relevance of Earnings and Book Values Over the Past Forty Years,” Journal of Accounting and Economics (December 1997), pp. 39-67.

*Francis, J. and Schipper, K., "Have Financial Statements Lost Their Relevance?" Journal of Accounting Research (Autumn 1999), pp. 319-352.

Liu, J. and J. Thomas, “Stock Returns and Accounting Earnings” Journal of Accounting Research 38 (Spring 2000): 71-102. *Landsman, W. and E. Maydew, “Has the Information Content of Quarterly Earnings Announcements Declined Over the Past Three Decades,” Journal of Accounting Research, (June 2002), pp. 797-808.

Kim, Myungsun, and W. Kross, “The Ability of Earnings to Predict Future Operating Cash Flows Has Been Increasing—Not Decreasing,” Journal of Accounting Research 43 (2005), 753-780.

Related methodological issues: Brown, S., Lo, K., and Lys, T., "Use of R2 in Accounting Research: Measuring Changes in Value Relevance over the Last Four Decades," Journal of Accounting and Economics (December 1999), pp. 83-116. Easton, P. and G. Sommers, “Scale and Scale Effects in Market-Based Accounting Research,” Working paper, Ohio State University, February 2000. Barth, M. and G. Clinch, “Scale Effects in Capital Markets-Based Accounting Research,” Working paper, Stanford University, March 2002.

Session 9: The information content in cash flows vs. earnings *Dechow, P., “Accounting Earnings and Cash Flows as Measures of Firm Performance: The Role of Accounting Accruals,” Journal of Accounting and Economics (Vol. 18 1994): 3-24. Ali, A., “The Incremental Information Content of Earnings, Working Capital from Operations, and Cash Flows,” Journal of Accounting Research (Spring 1994), 61-74. *Francis, J. and M. Smith, “A Reexamination of the Persistence of Accruals and Cash Flows,” Journal of Accounting Research 43 (2005), 413-451. Hanlon, M., “The Persistence and Pricing of Earnings, Accruals, and Cash Flows when Firms Have Large Book-Tax Differences,” Accounting Review (January 2005), 137-166. Ryan, S., J. Tucker, and P. Zarowin, “Classification and Market Pricing of the Cash Flows and Accruals of Trading Positions,” Accounting Review (March 2006), 443-472.

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Related methodological issues: Pfeiffer, R., P. Elgers, M. Lo, and L. Rees, “Additional Evidence on the Incremental Information Content of Cash Flows and Accruals: The Impact of Errors in Measuring Market Expectations,” The Accounting Review (July 1998), pp. 373-385. PART II. ACCOUNTING NUMBERS AS ECONOMIC MEASUREMENTS Session 10: Empirical tests of the Feltham-Ohlson framework *Bernard, V.L., “The Feltham-Ohlson Framework: Implications for Empiricists,” Contemporary Accounting Research (April 1995): 733-747. Penman, S., and T. Sougiannias, “Combining Earnings and Book Value in Equity Valuation,” Contemporary Accounting Research (Fall 1998), 291-324. Frankel, R., and C. Lee, “Accounting Valuation, Market Expectations, and Cross-Sectional Stock Returns,” Journal of Accounting & Economics (June 1998), 283-319. *Dechow, P., A. Hutton, and R. Sloan. “An Empirical Assessment of the Residual Income Valuation Model,” Journal of Accounting and Economics Vol. 26:1-34 (1999), including discussion by W. Beaver, p. 35-42. Francis, J., P. Olsson, and D. Oswald, “Comparing the Accuracy and Explainability of Dividend, Free Cash Flow and Abnormal Earnings Equity Value Estimates,” Journal of Accounting Research Vol. 38, No. 1 (Spring 2000): 45-70. Liu, J., D. Nissim, and J. Thomas, “Equity Valuation Using Multiples,” Journal of Accounting Research (March 2002): 135-172. Nissim, D., and S. Penman, “The Association Between Changes in Interest Rates, Earnings, and Equity Values,” Contemporary Accounting Research (Winter 2003): 775-804. Gode, D., and J. Ohlson, “Accounting Based Valuation with Changing Interest Rates,” Review of Accounting Studies (December 2004): 419-441. O’Hanlon, J. and K. Peasnell, “Residual Income Valuation: Are Inflation Adjustments Necessary?” Review of Accounting Studies (December 2004): 375-398. Yee, K., “Forward Versus Trailing Earnings in Equity Valuation,” Review of Accounting Studies (June/September 2004): 301-329. Also, see discussion by Easton, pp. 331-336. Joos, P., and G. Plesko. “Valuing Loss Firms,” The Accounting Review (July 2005): 847-870. Cheng, Q., “What Determines Residual Income?” The Accounting Review (January 2005): 58-112.

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Cheng, Q., “The Role of Analysts’ Forecasts in Accounting-Based Valuation: A Critical Evaluation,” Review of Accounting Studies (March 2005): 5-31. Monahan, S. “Conservatism, Growth, and the Role of Accounting Numbers in the Fundamental Analysis Process,” Review of Accounting Studies (June 2005): 227-260. Also, see discussion by Zhang, pp. 261-267. Callen, J., and D. Segal, “Empirical Tests of the Feltham–Ohlson (1995) Model,” Review of Accounting Studies, Volume 10, Number 4 (December 2005), pp. 409-429. Ohlson, J. “On Accounting-Based Valuation Formulae,” Review of Accounting Studies (June 2005): 323-347. Ohlson, J., and B. Juettner-Nauroth. “Expected EPS and EPS Growth as Determinants of Value,” Review of Accounting Studies (June 2005): 349-365. Penman, S., “Discussion of “On Accounting-Based Valuation Formulae” and “Expected EPS and EPS Growth as Determinants of Value,” Review of Accounting Studies (June 2005): 367-378. Background: Ohlson, J. A., “Earnings, Book Values and Dividends in Equity Valuation,” Contemporary Accounting Research (Spring 1995): 661-687. Feltham, G. A. and J. A. Ohlson, “Valuation and Clean Surplus Accounting for Operating and Financial Activities,” Contemporary Accounting Research (Spring 1995): 689-731. Lundholm, R. J., “A Tutorial on the Ohlson and Feltham/Ohlson Models,” Contemporary Accounting Research (April 1995): 749-761. Penman, S. “A Synthesis of Equity Valuation Techniques and the Terminal Value Calculation for the Dividend Discount Model,” Review of Accounting Studies (1997), pp. 303-323. Lee, C., “Accounting-Based Valuation: Impact on Business Practices and Research,” Accounting Horizons, (December 1999). J. Ohlson, “Earnings, Equity Book Values, and Dividends in Equity Valuation: An Empirical Perspective,” Contemporary Accounting Research Vol. 18 No.1 (Spring 2001): 107-120. Lundholm, R., and T. O’Keefe, “Reconciling Value Estimates from the Discounted Cash Flow Model and the Residual Income Model,” Contemporary Accounting Research Vol. 18 No. 2 (Summer 2001): 311-335. (Also see critique in Spring 2001 by Penman and reply by Lunholm and O’Keefe.) PART III. THE FAITH IS SHAKEN: THE DEGREE OF MARKET EFFICIENCY DEBATE

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Session 11: Market efficiency: Post-earnings announcement drift Bernard, V. and J. Thomas, “Post-Earnings Announcement Drift: Delayed Price Response or Risk Premium?” Journal of Accounting Research (Supplement 1989): 1-48, including discussion by L. Marais. *Bernard, V. and J. Thomas, “Evidence that Stock Prices do not Fully Reflect the Implications of Current Earnings for Future Earnings,” Journal of Accounting and Economics (Vol. 13, 1990): 305-340. *Fama, E., “Efficient Capital Markets II,” Journal of Finance (December 1991): 1575-1617. Abarbanell, J. and V. Bernard, “Tests of Analysts’ Overreaction/Underreaction to Earnings as an Explanation for Anomalous Stock Price Behavior,” Journal of Finance (July 1992): 1181-1207. Ball, R. and E. Bartov, “How Naïve is the Stock Market’s Use of Earnings Information?” Journal of Accounting and Economics (Vol. 21, 1996): 319-337. Bernard, V., J. Thomas and J. Wahlen, 1997, “Accounting-based Stock Price Anomalies: Separating Market Inefficiencies from Risk,” Contemporary Accounting Research 14, 89-136. Rangan, S., and R. Sloan, “Implications of the Integral Approach to Quarterly Reporting for the Post-Earnings-Announcement Drift,” The Accounting Review (1998): 353-372. Barber, B. and Lyon, J. “Detecting Long-run Abnormal Stock Returns: The Empirical Power and Specification of Test Statistics,” Journal of Financial Economics 43 (1997): 341-372. Kothari, S., and J. Warner, “Measuring Long-Horizon Security Price Performance,” Journal of Financial Economics (March 1997), 301-339. *Lyon, J., B. Barber, and C. Tsai, “Improved Methods for Tests of Long-Run Abnormal Stock Returns,” Journal of Finance (February 1999), 165-201. Liang, L. “Post-Earnings Announcement Drift and Market Participants’ Information Processing Biases,” Review of Accounting Studies (June/September 2003): 321-345. Also see discussion by Thomas, pp. 347-353. Kimbrough, M. “The Effect of Conference Calls on Analyst and Market Underreaction to Earnings Announcements,” The Accounting Review (January 2005): 189-219. Chordia, T., and L. Shivakumar, “Inflation Illusion and Post-Earnings-Announcement Drift,” Journal of Accounting Research 43 (2005): 521-556. Kothari, S.P., J.S. Sabino, and T. Zach, “Implications of Survival and Data Trimming for Tests of Market Efficiency,” Journal of Accounting and Economics, forthcoming. Kraft, A., A. Leone, and C. Wasley, “Research Design Issues and Related Inference Problems Underlying Tests of the Market Pricing of Accounting Information,” working paper 2005. Garfinkel, J. and J. Sokobin, “Volume, Opinion Divergence, and Returns: A Study of Post-Earnings

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Announcement Drift,” Journal of Accounting Research (March 2006), 85-112. Livnat, J. and R. Mendenhall, “Comparing the Post-Earnings Announcement Drift for Surprises Calculated from Analyst and Time Series Forecasts,” Journal of Accounting Research (March 2006), 177-205. Shin, H., “Disclosure Risk and Price Drift,” Journal of Accounting Research (May 2006), 351-379. Chardia, T. and L. Shivakumar, “Earnings and Price Momentum,” Journal of Financial Economics (June 2006), 627-656. Narayanamoorthy, G., “Conservatism and Cross-Sectional Variation in the Post-Earnings Announcement Drift,” Journal of Accounting Research (September 2006), 763-789. Doyle, J., R. Lundholm, and M. Soliman, “The Extreme Future Stock Returns following I/B/E/S Earnings Surprises,” Journal of Accounting Research (December 2006), 849-887.

Session 12: Market efficiency: Other tests Fama “Market Efficiency, Long-term Returns, and Behavioral Finance” (1988) Ou, J. and S. Penman, “Financial Statement Analysis and the Prediction of Stock Returns,” Journal of Accounting and Economics (January 1989): 295-329. Harris, T. and J. Ohlson, “Accounting Disclosures and the Market’s Valuation of Oil and Gas Properties: Evaluation of Market Efficiency and Functional Fixation,” The Accounting Review (October 1990): 764-780. Hand, J., “A Test of the Extended Functional Fixation Hypothesis,” The Accounting Review (October 1990): 740-763. Tinic, S., “A Perspective on the Stock Market’s Fixation on Accounting Numbers,” The Accounting Review (October 1990): 781-796. Ball, R. and S. P. Kothari, “Security Returns around Earnings Announcements,” The Accounting Review (October 1991): 718-738. Hand, J., “Extended Functional Fixation and Security Returns around Earnings Announcements: A Reply to Ball and Kothari,” The Accounting Review (October 1991): 739-746. Holthausen, R. and D. Larcker, “The Prediction of Stock Returns using Financial Statement Information,” Journal of Accounting and Economics (January 1992): 373-411. Ball, R., “The Earnings-Price Anomaly,” Journal of Accounting and Economics (Vol. 15, 1992): 319-345. *Penman S., “Return to Fundamentals,” Journal of Accounting, Auditing & Finance (1992): 465-484.

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Lakonishok, J., A. Shleifer and R. Vishny, “Contrarian Investment, Extrapolation, and Risk,” Journal of Finance (December 1994): 1541-1578. Ball, R., “The Development, Accomplishments, and Limitations of the Theory of Stock Market Efficiency,” Managerial Finance 20 (1994): 3-48. Abarbanell, J. and V. Bernard, 2000. “Is the U.S. Stock Market Myopic?” Journal of Accounting Research Vol.38, No. 2 (Autumn): 221-242. *Piotroski, J. “Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers,” Journal of Accounting Research Vol. 38 (Supplement 2000): 1-51 (including the discussion by W. Guay). Burgstahler, D., J. Jiambalvo, and T. Shevlin. “Do Stock Prices Fully Reflect the Implications of Special Items for Future Earnings?” Journal of Accounting Research (June 2002): 585-612. Trueman, B, M.H.F. Wong and X.J. Zhang, “Anomalous Stock Returns around Internet Firms’ Earnings Announcements,” Journal of Accounting and Economics (34), 2003: 249-271. Also, see discussion by Berger, pp. 273-281. Ali, A., L-S. Hwang, and M. Trombley. “Residual-Income Based Valuation Predicts Future Stock Returns: Evidence on Mispricing vs. Risk Explanations,” The Accounting Review (April 2003): 377-397. Rajgopal, S., T. Shevlin, and M. Venkatachalam. “Does the Stock Market Fully Appreciate the Implications of Leading Indicators for Future Earnings? Evidence from Order Backlog,” Review of Accounting Studies (December 2003): 461-492. Baker, M., R.S. Ruback, and J. Wurgler, “Behavioral Corporate Finance: A Survey,” working paper, 2004. Chan, W.S., R. Frankel and S.P. Kothari, “Testing Behavioral Finance Theories Using Trends and Consistency in Financial Performance,” Journal of Accounting and Economics (38), 2004, 3-50. Also, see discussion by Daniel, pp. 51-64. Mohanram, P., “Separating Winners from Losers Among Low Book-to-Market Stocks using Financial Statement Analysis,” Review of Accounting Studies (June 2005): 133-170. Also see discussion by Piotroski on pp. 171-184. Rees, L. “Abnormal Returns from Predicting Earnings Thresholds,” Review of Accounting Studies (December 2005): 465-496. *Taffler, R., J. Lu, and A. Kausar, “In Denial? Stock Market Underreaction to Going-Concern Audit Report Disclosures,” Journal of Accounting & Economics (December 2004), 263-296. Hirshleifer, D., K. Hou, S. Teoh, and Y. Zhang, “Do Investors Overvalue Firms with Bloated Balance Sheets,” Journal of Accounting & Economics (December 2004), 297-331.

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Session 13: The accrual anomaly *Sloan, R., “Do Stock Prices Fully Impound Information in Accruals and Cash Flows about Future Earnings?” The Accounting Review (July 1996): 289-315. Xie, H., 2001. “The Mispricing of Abnormal Accruals,” The Accounting Review Vol. 76, No. 3: 357-373. Collins, D., G. Gong, and P. Hribar. “Investor Sophistication and the Mispricing of Accruals,” Review of Accounting Studies (June/September 2003): 251-276. Also see discussion by Bartov, pp. 277-281. Fairfield, P., S. Whisenant, and T. Yohn, “Accrued Earnings and Growth: Implications for Future Profitability and Market Mispricing,” The Accounting Review (January 2003): 353-372. *Desai, H., S. Rajgopal, and M. Venkatachalam. “Value-Glamour and Accruals Mispricing: One Anomaly or Two?” The Accounting Review (April 2004): 355-385. Hirshleifer, D., K. Hou, S.H. Teoh, and Y.L. Zhang, “Do Investors Overvaluate Firms with Bloated Balance Sheets?” Journal of Accounting and Economics (38), 2004, 297-331. Basu, S., “What Do We Learn from Two New Accounting-based Stock Market Anomalies?” Journal of Accounting and Economics (38), 2004, 333-348. DeFond, M., and C. Park, “The Reversal of Abnormal Accruals and the Market Valuation of Earnings Surprises,” Accounting Review (July 2001), 375-404. Callen, D., and D. Segal, “Do Accruals Drive Firm-Level Stock Returns? A Variance Decomposition Analysis,” Journal of Accounting Research (June 2004), 527-560. Pincus, M., Rajgopal, S., and M. Venkatachalam. “The Accrual Anomaly: International Evidence.” The Accounting Review (January 2007), 169-205. Session 14: The accrual anomaly (continued) *Mashruwala, C., S. Rajgopal, and T. Shevlin, “Why Is the Accrual Anomaly Not Arbitraged Away? The Role of Idiosyncratic Risk and Transaction Costs,” Journal of Accounting & Economics (October 2006), 3-33. *Pontiff, J., “Costly Arbitrage and the Myth of Idiosyncratic Risk,” Journal of Accounting & Economics (October 2006), 35-52. *Kraft, A., A. Leone, and C. Wasley, “An Analysis of the Theories and Explanations Offered for the Mispricing of Accruals and Accrual Components,” Journal of Accounting Research (May 2006), 297-339. Kraft, A., A. Leone, and C. Wasley, “Regression-Based Tests of the Market Pricing of Accounting Numbers: The Mishkin Test and Ordinary Least Squares.” Journal of Accounting Research (December

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2007): 1081-1114. Session 15: Earnings Quality *Francis, J., R. LaFond, P. Olsson, and K. Schipper, “The Market Pricing of Accruals Quality,” Journal of Accounting & Economics (June 2005), 295-327. Core, J., W. Guay, and R. Verdi, “Is Accruals Quality a Priced Risk Factor?” Wharton Working Paper (June 2006). Louis, H. and D. Robinson, “Do Managers Credibly Use Accruals to Signal Private Information? Evidence from the Pricing of Discretionary Accruals around Stock Splits,” Journal of Accounting & Economics (June 2005), 361-380. Graham, J., C. Harvey, and S. Rajgopal, “The Economic Implications of Corporate Financial Reporting,” Journal of Accounting & Economics (December 2005), 3-73. Tucker, J. and P. Zarowin, “Does Income Smoothing Improve Earnings Informativeness?” Accounting Review (January 2006), 251-270. Richardson, R., R. Sloan, M. Soliman, and I. Tuna, “The Implication of Accounting Distortions and Growth for Accruals and Profitability,” Accounting Review (May 2006), 713-743. Christensen, P., G. Feltham, and F. Sabac, “A Contracting Perspective on Earnings Quality,” Journal of Accounting & Economics (June 2005), 265-294. Wang, D., “Founding Family Ownership and Earnings Quality,” Journal of Accounting Research (June 2006), 619-656. *Ecker, F., J. Francis, I. Kim, P. Olsson, K. Schipper, “A Returns-Based Representation of Earnings Quality,” Accounting Review (July 2006), 749-780. Session 16: Cost of capital

Beaver, W., P. Kettler and M. Scholes. “The Association between Market-Determined and Accounting-Determined Measures of Risk.” The Accounting Review (October 1970):654-682. Frankel, R., and Lee, C., “Accounting Valuation, Market Expectation, and Cross-Sectional Stock Returns,” Journal of Accounting and Economics (1999): 283-320. Gebhardt, W., C.M.C. Lee, and B. Swaminathan. “Toward an Implied Cost-of-Capital.” Journal of Accounting Research 39 (June 2001).

Baginski, S., and J. Wahlen. “Residual Income Risk, Intrinsic Values, and Share Prices.” The Accounting Review (January 2003): 327-352. Gode, D., and P. Mohanram. “Inferring Cost of Capital Using the Ohlson-Juettner Model.” Review of

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Accounting Studies 8 (December 2003): 399-431. Francis, J., R. LaFond, P. Olsson, and K. Schipper. “Costs of Equity and Earnings Attributes,” The Accounting Review, (October 2004): 967-1010. Easton, P. “PE Ratios, PEG Ratios, and Estimating the Implied Expected Rate of Return on Equity Capital,” The Accounting Review (January 2004): 73-95. Copeland, T., A. Dolgoff, and A. Moel. “The Role of Expectations in Explaining the Cross-Section of Stock Returns,” Review of Accounting Studies 9 (June/September 2004): 149-188. Also see discussion by Jing Liu, pp. 189-196. Dechow, P., R. Sloan, and M. Soliman. “Implied Equity Duration: A New Measure of Equity Risk,” Review of Accounting Studies 9 (June/September 2004): 197-228. Also see discussion by Pedro Santa-clara, pp. 229-231. *Botosan, C., and Plumlee, M., “Assessing Alternatives Proxies for Expected Risk Premium,” The Accounting Review, (January 2005), 21-53.

*Easton, P., and Monahan, S., “An Evaluation of Accounting Based Measures of Expected Returns,” The Accounting Review, April (2005). *Francis, J, Lafond, R., Olsson, P., and Schipper, K., “The Market Pricing of Accruals Quality,” Journal of Accounting and Economics 39(2) (2005). Jiang, G., C. M. C. Lee, and Y. Zhang. “Information Uncertainty and Expected Returns,” Review of Accounting Studies 10 (June 2005): 185-221. Also see discussion by Paul Schultz, pp. 223-226. Easton, P., and G. Sommers. “Effect of analysts’ optimism on estimates of the expected rate of return implied by earnings forecasts.” Journal of Accounting Research (December 2007): 983-1016. Lui, D., S. Markov, and A. Tamayo. “What makes a stock risky? Evidence from sell-side analysts’ risk ratings.” Journal of Accounting Research (June 2007): 629-665.

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OTHER AREAS IN CAPITAL MARKETS RESEARCH International Alford, A., J. Jones, R. Leftwich, and M. Zmijewski, “The Relative Informativeness of Accounting Disclosures in Different Countries,” Journal of Accounting Research (Supplement 1993), 183-223. Amir, E., T. Harris, and E. Venuti, “A Comparison of the Value-Relevance of US versus Non-US GAAP Accounting Measures Using Form 20-F Reconciliations,” Journal of Accounting Research (Supplement 1993), 230-264. Ali, A. and L. Hwang, “Country-Specific Factors Related to Financial Reporting and the Value Relevence of Accounting Data,” Journal of Accounting Research (Spring 2000), 1-21. Ball, R., S. Kothari, and A. Robin, “The Effect of International Institutional Factors on Properties of Accounting Earnings,” Journal of Accounting & Economics (February 2000), 1-52. Land, J., and M. Lang, “Empirical Evidence on the Evolution of International Earnings,” Accounting Review (Supplement 2002), 115-133. Gordan E. and P. Joos. “Unrecognized Deferred Taxes: Evidence from the U.K.” Accounting Review (January 2004), 97-124. Defond, M., and M. Hung, “Investor Protection and Corporate Governance: Evidence from Worldwide CEO Turnover,” Journal of Accounting Research (May 2004), 269-312.. Khanna, R., K. Palepu, and S. Srinivasan, “Disclosure Practices of Foreign Companies Interacting with U.S. Markets” Journal of Accounting Research (May 2004), 457-508. Chen, K. and H. Yuan, “Earnings Management and Capital Resource Allocation: Evidence from China’s Accounting-Based Regulation of Rights Issues,” Accounting Review (July 2004), 645-665. Bradshaw, M., B. Bushee, and G. Miller, “Accounting Choice, Home Bias, and U.S. Investment in Non-U.S. Firms,” Journal of Accounting Research (December 2004) 795-841. Fan, J. and T. Wong, “Do External Auditors Perform a Corporate Governance Role in Emerging Markets? Evidence from East Asia,” Journal of Accounting Research (March 2005) 35-72. Bushman, R., J. Piotroski, and A. Smith, “What Determines Corporate Transparency?” Journal of Accounting Research (May 2004), 207-252. Francis, J., I. Khurana, and R. Pereira, “Disclosure Incentives and Effects on Cost of Capital around the World,” Accounting Review (October 2005), 1125-1162. Frost, C., E. Gordon, and A. Hayes, “Stock Exchange Disclosure and Market Development: An Analysis of 50 International Exchanges,” Journal of Accounting Research (June 2006), 437-483.

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Hail, L. and C. Leuz, “International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter?” Journal of Accounting Research (June 2006), 485-531. Lang, M., J. Raedy, and W. Wilson, “Earnings Management and Cross Listing: Are Reconciled Earnings Comparable to US Earnings?” Journal of Accounting & Economics (October 2006), 255-283. Bushman, R. and J. Piotroski, “Financial Reporting Incentives for Conservative Accounting: The Influence of Legal and Political Institutions,” Journal of Accounting & Economics (October 2006), 107-148. Auditing Butler, M., A. Leone, and M. Willenborg, “An Empirical Analysis of Auditor Reporting and Its Association with Abnormal Returns,” Journal of Accounting & Economics (September 2004), 139-165. Mansi, S., W. Maxwell, and D. Miller, “Does Auditor Quality and Tenure Matter to Investors? Evidence from the Bond Market,” Journal of Accounting Research (September 2004), 755-793. Pittman, J., and S. Fortin, “Auditor Choice and the Cost of Debt Capital for Newly Public Firms,” Journal of Accounting & Economics (February 2004), 113-136. Menon, K. and D. Williams, “Former Audit Partners and Abnormal Accurals,” Accounting Review (October 2004), 1095-1118. H. Louis, “Acquirers’ Abnormal Returns and the non-Big 4 Auditor Clientele Effect,” Journal of Accounting & Economics (December 2005), 75-99. Botosan, C., W. Kinney, and Z. Palmrose working paper 2007 SEC Regulation Asthana, S. and S. Balsam, “Differential Response of Small versus Large Investors to 10-K Filings on EDGAR” Accounting Review (July 2004), 571-589. Bushee, B., D. Matsumoto, and G. Miller, “Managerial and Investor Responses to Disclosure Regulation: The Case of Reg FD and Conference Calls,” Accounting Review (July 2004), 617-643. Bushee, B. and C. Leuz, “Economic Consequences of SEC Disclosure Regulation: Evidence from the OTC Bulletin Board,” Journal of Accounting & Economics (June 2005), 233-264. Chang, H., J. Chen, W. Liao, and B. Mishra, “CEOs’/CFOs’ Swearing by the Numbers: Does It Impact Share Price of the Firm?” Accounting Review (January 2006), 1-27.

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The information environment: Financial Analysts, Institutions, Insiders, Etc. Determinants of the association between earnings and returns: Size, analyst following, and institutional ownership Atiase, R., “Predisclosure Information, Firm Capitalization and Security Price Behavior around Earnings Announcements,” Journal of Accounting Research (Spring 1985), 21-36. Freeman, R., "The Association between Accounting Earnings and Security Returns for Large and Small Firms," Journal of Accounting & Economics (July 1987), 195-228. Bamber, L., “Unexpected Earnings, Firm Size, and Trading Volume around Quarterly Earnings Announcements,” Accounting Review (July 1987), 510-532. Ayers, B. and R. Freeman, “Why Do Large Firms’ Prices Anticipate Earnings Earlier than Small Firms’ Prices?” Contemporary Accounting Research (Summer 2000), 191-212. Ayers, B. and R. Freeman, “Evidence that Analyst Following and Institutional Ownership Accelerate the Pricing of Future Earnings,” Review of Accounting Studies (March 2003), 47-67. Piotroski, J. and D. Roulstone, “The Influence of Analysts, Institutional Investors, and Insiders on the Incorporation of Market, Industry, and Firm-Specific Information into Stock Prices,” Accounting Review (October 2004), 1119-1151. Sell-Side Analyst Forecasts (including accuracy relative to time series forecasts) Foster, G., “Quarterly Earnings Data: Time Series Properties and Predictive Ability Results,” Accounting Review (January 1977), 1-21. Brown, L. and M. Rozeff, “The Superiority of Analyst Forecasts as Measures of Expectations: Evidence from Earnings,” Journal of Finance (March 1978), 1-16. Brown, L., P. Griffin, R. Hagerman, and M. Zmijewski, “Security Analyst Superiority Relative to Univariate Time Series Models in Forecasting Quarterly Earnings,” Journal of Accounting & Economics (April 1987), 61-87. Lobo, G. and A. Mahmoud, “Relationship between Differential Amounts of Prior Information and Security Return Variability,” Journal of Accounting Research (Spring 1989), 116-134. Kross, W., B. Ro, and D. Schroeder, “Earnings expectations: The analyst’s information advantage,” Accounting Review (April 1990), 461-476. Stickel, S., “Predicting Individual Analysts’ Earnings Forecasts,” Journal of Accounting Research (Autumn 1990), 409-417. Ajinkya, B., R. Atiase, and M. Gift, “Volume of Trading and the Dispersion in Financial Analysts' Earnings Forecasts,” Accounting Review (April 1991), 389-401.

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Brown, L. and K. Kim, “Timely Aggregate Analyst Forecasts as Better Proxies for Market Earnings Expectations,” Journal of Accounting Research (Autumn 1991), 382-385. Philbrick, D. and W. Ricks, “Using Value line and IBES Analyst Forecasts in Accounting Research,” Journal of Accounting Research (Autumn 1991), 379-417. Schipper, K., “Analysts' Forecasts,” Accounting Horizons (December 1991), 105-121. Elgers, P. and D. Murray, “The Relative and Complementary Performance of Analyst and Security-Price-Based Measures of Expected Earnings,” Journal of Accounting & Economics (June/September 1992), 303-316. Stickel, S. “Reputation and Performance among Security Analysts,” Journal of Finance (December 1992), 1811-1836. McNichols, M. and P. O’Brien, “Self-Selection and Analyst Coverage,” Journal of Accounting Research (Supplement 1997), 167-199. Lin, H. and M. McNichols, “Underwriting Relationships, Analysts’ Earnings Forecasts and Investment Recommendations,” Journal of Accounting & Economics (February 1998), 101-127. O'Brien, P., “Analysts' Forecasts as Earnings Expectations,” Journal of Accounting & Economics (January 1998), 53-83. Clement, M. “Analyst Forecast Accuracy: Do Ability, Resources and Portfolio Complexity Matter?” Journal of Accounting & Economics (1999), 285-303. Lim, T. “Rationality and Analyst Forecast Bias,” Journal of Finance (February 2001), 369-385. Bradshaw, M., “The Use of Target Prices to Justify Sell-Side Analysts’ Stock Recommendations,” Accounting Horizons (March 2002), 27-41. Bartov, E., D. Givoly, and C. Hayn, “The Rewards to Meeting or Beating Earnings Expectations,” Journal of Accounting & Economics (June 2002), 173-204. Clement, M. and S. Tse “Do Analyst Characteristics that Are Associated with Forecast Accuracy Matter to Investors?” Accounting Review (January 2003), 227-249. Bradshaw, M., “How Do Analysts Use their Earnings Forecasts in Generating Stock Recommendations?” Accounting Review (January 2004), 25-50. Irvine, P., “Analysts’ Forecasts and Brokerage-Firm Trading,” Accounting Review (January 2004), 125-149. Mikhail, M., B. Walther, and R. Willis, “Do Security Analysts Exhibit Persistent Differences in Stock Picking Ability?” Journal of Financial Economics (October 2004), 67-91.

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Basu, S. and S. Markov, “Loss Function Assumptions in Rational Expectations Tests of Financial Analysts’ Earnings Forecasts,” Journal of Accounting & Economics (December 2004), 171-203. Gu, Z. and T. Chen, “Analysts’ Treatment of Nonrecurring Items in Street Earnings,” Journal of Accounting & Economics (December 2004), 129-170. Herrman, D. and W. Thomas, “Rounding of Analyst Forecasts,” Accounting Review (July 2005), 805-823. O’Brien, P., M. McNichols, and H. Lin, “Analyst Impartiality and Investment Banking Relationships,” Journal of Accounting Research (September 2005), 623-650. Li, X., “The Persistence of Relative Performance in Stock Recommendations of Sell-Side Financial Analysts,” Journal of Accounting & Economics (December 2005), 129-152. Cowen, A., B. Groysberg, and P. Healy, “Which Types of Analyst Firms Are More Optimistic?” Journal of Accounting & Economics (April 2006), 119-146. Barber, B., R. Lehavy, M. McNichols, and B. Trueman, “Buys, Holds, and Sells: The Distribution of Investment Banks’ Stock Ratings and the Implications for the Profitability of Analysts’ Recommendations,” Journal of Accounting & Economics (April 2006), 87-117. Loh, R. and G. Mian, “Do Accurate Earnings Forecasts Facilitate Superior Investment Recommendations?” Journal of Financial Economics (May 2006), 455-483. Markov, S. and A. Tamayo, “Predictability in Financial Analyst forecast Errors: Learning or Irrationality?” Journal of Accounting Research (September 2006), 725-761. Chen, S. and D. Matsumoto, “Favorable versus Unfavorable Recommendations: The Impact of Analyst Access to Management-Provided Information,” Journal of Accounting Research (September 2006), 657-689. Market Reactions to Analysts’ Forecasts Ivkovic, Z., and N. Jegadeesh, “The Timing and Value of Forecast and Recommendation Revisions” Journal of Financial Economics (September 2004), 433-463. Chen, Q., J. Francis, and W. Jiang, “Investor Learning about Analyst Predictive Ability,” Journal of Accounting & Economics (February 2005), 3-24. Frankel, R., S. Kothari, and J. Weber, “Determinants of the Informativeness of Analyst Research,” Journal of Accounting & Economics (April 2006), 29-54. Bonner, S., A. Hugon, and B. Walther. “Investor Reactions to Celebrity Analysts: The Case of Earnings Forecast Revisions,” Journal of Accounting Research (June 2007): 481-514.

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Meeting or Beating Market Earnings Expectations Bartov, E., D. Givoly and C. Hayn, “The Rewards to Meeting or Beating Earnings Expectations,” Journal of Accounting & Economics (June 2002), 173-204. Kasznik, R. and M. McNichols, “Does Meeting Expectations Matter? Evidence from Analyst Forecast Revisions and Share Prices,” Journal of Accounting Research (June 2002), 727-760. Richardson, S., S. Teoh, and P. Wysocki, “The Walk-Down to Beatable Analyst Forecasts: The Role of Equity Issuance and Insider Trading Incentives,” Contemporary Accounting Research (Winter 2004), 885-924. Institutional Investors Ke, B., and K. Petroni, “How Informed Are Actively Trading Institutional Investors? Evidence from their Trading Behavior before a Break in a String of Consecutive Earnings Increases,” Journal of Accounting Research (December 2004) 895-927. Ke, B. and S. Ramalingegowda, “Do Institutional Investors Exploit the Post-Earnings Announcement Drift?” Journal of Accounting & Economics (February 2005), 25-53. Callen, J., O. Hope, and D. Segal, “Domestic and Foreign Earnings, Stock Return Variability, and the Impact of Investor Sophistication,” Journal of Accounting Research (September 2005), 377-412. Ajinkya, B., S. Bhojraj, and P. Sengupta, “The Association between Outside Directors, Institutional Investors and the Properties of Management Earnings Forecasts,” Journal of Accounting Research (September 2005), 343-376. Insiders Frankel, R., and X. Li, “Characteristics of a Firm’s Information Environment and the Information Asymmetry between Insiders and Outsiders,” Journal of Accounting & Economics (June 2004), 229-259. Bartov, E. and P. Mohanram, “Private Information, Earnings Manipulations, and Executive Stock-Option Exercises,” Accounting Review (October 2004), 889-920. Piotroski, J. and D. Roulstone, “Do Insider Trades Reflect both Contrarian Beliefs and Superior Knowledge about Future Cash Flow Realizations,” Journal of Accounting & Economics (February 2005) 55-81. Aboody, D., J. Hughes, and J. Liu, “Earnings Quality, Insider Trading, and Cost of Capital,” Journal of Accounting Research (December 2005) 651-73. Pownall, G. and P. Simko, “The Information Intermediary Role of Short Sellers,” Accounting Review (July 2005), 941-966.

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The value relevance of specific accounting measures and disclosures Barth, M., “Fair Value Accounting: Evidence from Investment Securities and the Market Valuation of Banks,” The Accounting Review (January 1994): 1-25. Barth, M., and M. McNichols. “Estimation and Market Valuation of Environmental Liabilities Relating to Superfund Sites,” Journal of Accounting Research (Supplement 1994): 177-209. Harris, T., M. Lang, and H. Moller, “The Value Relevance of German Accounting Measures: An Empirical Analysis,” Journal of Accounting Research (1994): 187-209. Petroni, K. and J. Wahlen, “Fair Value of Equity and Debt Securities and Share Prices of Property-Liability Insurers,” Journal of Risk and Insurance (Vol. 62 1995): 719-737. Nelson, K., “Fair Value Accounting for Commercial Banks: An Empirical Analysis of SFAS No. 107,” Accounting Review (April 1996), pp. 161-182.

Eccher, E., K. Ramesh, and R. Thiagarijan, “Fair Value Disclosures by Bank Holding Companies,” Journal of Accounting and Economics, (August-December 1996), pp. 79-117. Amir, E. and Lev, B., "Value-Relevance of Nonfinancial Information: The Wireless Communications Industry," Journal of Accounting & Economics (August - December, 1996), pp. 3-30. Also, see discussion by Shevlin, pp. 31-42. Sougiannis, T., "The Accounting Based Valuation of Corporate R&D," Accounting Review (January 1994), pp. 44-68. Lev, B. and Sougiannies, T., "The Capitalization, Amortization and Value-Relevance of R&D," Journal of Accounting & Economics (February 1996), pp. 107-138. Barth, M., W. Beaver and W. Landsman, “Value-Relevance of Banks’ Fair Value Disclosures under SFAS 107,” The Accounting Review (October 1996): 513-537. Barth, M., M. Clement, G. Foster, and R. Kasznik, “Brand Values and Capital Market Valuation,” Review of Financial Studies (1998): 41-68. Ayers, B. “Deferred Tax Accounting Under SFAS No. 109: An Empirical Investigation of its Incremental Value Relevance to APB No. 11,” The Accounting Review, (1998): 195-212. Dhaliwal, D., K. R. Subramanyam, and R. Trezevant, “Is Comprehensive Income Superior to Net Income as a Measure of Firm Performance?” Journal of Accounting and Economics (1999): 43-67. Davis-Friday, P. , L. Folami, C. Liu and F. Mittelstaedt, “The Value Relevance of Financial Statement Recognition vs. Disclosure: Evidence from SFAS No. 106,” Accounting Review (October 1999), pp. 403-422.

Holthausen, R.W. and R.L. Watts, “The Relevance of the Value-Relevance Literature for Financial Accounting Standard Setting,” Journal of Accounting and Economics, (2001, Sept), 3-75.

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Barth, M., Beaver, W. and Landsman, W., “The Relevance of the Value Relevance Literature for

Financial Accounting Standard Setting: Another View,” Journal of Accounting and Economics (2001, Sept), 77-104. Aboody, D., J. Hughes and J. Liu, “Measuring Value Relevance in a (Possible) Inefficient Market,” Journal of Accounting Research (September 2002), pp. 965-986.

Louis, H., “The Value Relevance of the Foreign Translation Adjustment,” The Accounting Review (October 2003): 1027-1047. Kallapur, S., and Kwan, S., “The Value Relevance and Reliability of Brand Assets Recognized by U.K. Firms,” The Accounting Review (January 2004), pp. 151-172. Core, J., W. Guay, and S.P. Kothari, “The Economic Dilution of Employee Stock Options: Diluted EPS for Valuation and Financial Reporting,” The Accounting Review (July 2002): 627-653. Aboody, D, Barth, M., and Kasznik, R., “SFAS 123 Stock-Based Compensation Expense and Equity Market Values,” The Accounting Review, (April 2004): 251-275.

Guenther, D. and R. Sansing, “The Valuation Relevance of Reversing Deferred Tax Liabilities,” The Accounting Review (April 2004): 437-451. Clarkson, P., Y. Li, and G. Richardson, “The Market Valuation of Environmental Capital Expenditures by Pulp and Paper Companies,” The Accounting Review, (April 2004): 329-353. Venkatachalam, M., “Value Relevance of Banks’ Derivative Disclosures,” Journal of Accounting and Economics, (August-December 1996), pp. 327-355.

Schrand, C., “The Association Between Stock-Price Interest Rate Sensitivity and Disclosures about Derivative Instruments” The Accounting Review (January 1997): 87-109. Ryan, S. “A Survey of Research Relating Accounting Numbers to Systematic Equity Risk, with Implications for Risk Disclosure Policy and Future Research.” Accounting Horizons 11 (1997): 82-95.

Rajgopal, S. “Early Evidence of the Informativeness of the SEC’s Market Risk Disclosures: The Case of Commodity Price Risk Exposure of Oil and Gas Producers.” The Accounting Review 74 (July 1999): 251-280. Linsmeier, T., D. Thornton, M. Venkatachalam, and M. Welker. “The Effect of Mandated Market Risk Disclosures on Trading Volume Sensitivity to Interest Rate, Exchange Rate, and Commodity Price Movements.” The Accounting Review (April 2002). Jorion, P. “How Informative are Value-at-Risk Disclosures?” The Accounting Review (October 2002): 911-932.

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Voluntary disclosure Are Voluntary Disclosures Credible? The Information Content of Management Earnings Forecasts Patel, J. “Corporate forecasts of earnings per share and stock price behavior: empirical tests.” Journal of Accounting Research (1976): 246-276. Waymire, G., “Additional evidence on the information content of management earnings forecast disclosures.” Journal of Accounting Research 22 (Autumn 1984): 703-717. Pownall, G, and G. Waymire, “Voluntary disclosure credibility and securities prices: Evidence from management earnings forecasts, 1969-1973.” Journal of Accounting Research 27 (1989): 227-245. Baginski, S. “Intraindustry information transfer associated with management forecasts of earnings.” Journal of Accounting Research (Autumn 1987). Variation in Management Forecast Credibility: Forecast precision Baginski, S.P., E. Conrad, and J. Hassell. “The effects of management forecast precision on equity pricing and on the assessment of earnings uncertainty.” The Accounting Review 68 (October 1993): 913-927. Variation in Management Forecast Credibility: Supplementary explanations and statements Baginski, S. P., J. M. Hassell, and M. Kimbrough. “Why do managers explain their earnings forecasts?” Journal of Accounting Research (March 2004), pp. 1-30. Hutton, A., G. Miller, and D. Skinner. “The role of supplementary statements with management earnings forecasts.” Journal of Accounting Research 41 (December 2003): 867-890. Variation in Management Forecast Credibility: Prior forecast credibility Williams, P. “The relation between a prior earnings forecast by management and analyst response to a current management forecast.” The Accounting Review 71 (January 1996): 103-115. Rogers, J. and P. Stocken. “Credibility of management forecasts.” The Accounting Review (2005): 1233-1260. Atiase, R., S. Suppattarakul, and S. Tse. “Price and volume reaction to management earnings forecasts: The incremental effect of management’s prior forecasting reputation.” Forthcoming, Journal of Accounting, Auditing, and Finance (2005). Voluntary Disclosure Incentives: Legal Liability Skinner, D., “Why firms voluntarily disclose bad news,” Journal of Accounting Research (Spring 1994): 38-60. Kasznik, R. and B. Lev, “To warn or not to warn: Management disclosures in the face of an earnings surprise,” The Accounting Review (January 1995): 113-134.

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Baginski, S. P., J. Hassell, and M. Kimbrough. “The effect of legal environment on voluntary disclosure: Evidence from management earnings forecasts issued in U.S. and Canadian markets.” The Accounting Review (January 2002). Tucker, J. “Is openness penalized? Stock returns around earnings warnings.” The Accounting Review (July 2007): 1055-1088. Voluntary Disclosure Incentives: Information Asymmetry King, R., G. Pownall, and G. Waymire. “Expectations adjustment via timely earnings forecast disclosure: Review, synthesis, and suggestions for future research.” Journal of Accounting Literature 9 (1990): 113-144. Healy, P., and K. Palepu. “Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature.” Journal of Accounting and Economics 31 (2001): 405-440. Coller, M., and T. Yohn. “Management forecasts and information asymmetry: An examination of bid-ask spreads.” Journal of Accounting Research 35 (Autumn 1997): 181-192. Voluntary Disclosure Incentives: External Financing Frankel, R., M. McNichols, and G. P. Wilson, “Discretionary disclosure and external financing,” The Accounting Review (January 1995): 135-150. Marquardt, C., and C. Wiedman. “Voluntary disclosure, information asymmetry, and insider selling through secondary offerings.” Contemporary Accounting Research (1998): 505-537. Lang, M. and R. Lundholm. “Voluntary disclosure and equity offerings: Reducing information asymmetery or hyping the stock? Contemporary Accounting Research (2000): 623-662. Richardson, S., S. Teoh, and P. Wysocki. “The walkdown to beatable analyst forecasts: The roles of equity issuance and insider trading incentives.” Contemporary Accounting Research (2004) Voluntary Disclosure Incentives: Compensation Noe, C. “Voluntary disclosures and insider transactions.” Journal of Accounting and Economics 27 (1999): 305-326. Aboody, D. and R. Kasznik. “CEO stock option awards and the timing of corporate voluntary disclosures.” Journal of Accounting and Economics 29 (February 2000): 73-100. Nagar, V., D. Nanda, and P. Wysocki. “Discretionary disclosure and stock-based incentives.” Journal of Accounting and Economics (2003): 283-309. Gu, F., and J. Li. “The credibility of voluntary disclosure and insider stock transactions.” Journal of Accounting Research (Sept. 2007): 771-810. Voluntary Disclosure Incentives: Proprietary Costs

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Bamber, L. and S. Cheon. “Discretionary management earnings forecast disclosures: Antecedents and outcomes associated with forecast venue and forecast specificity choices.” Journal of Accounting Research 39 (Autumn 1998), 167-191. Guo, R-J., B. Lev, and N. Zhou. “Competitive costs of disclosure by biotech IPOs.” Journal of Accounting Research (May 2004): 319-355. Verrecchia, R., and J. Weber. “Redacted disclosure.” Journal of Accounting Research (September 2006): 791-814. The Association Between Voluntary Disclosure and Corporate Control Ajinkya, B., S. Bhoraj, and P. Sengupta. “The association between outside directors, institutional investors and the properties of management earnings forecasts.” Journal of Accounting Research 43 (2005): 343-376. Karamanou, I. and N. Vafaes. “The association between corporate boards, audit committees, and management earnings forecasts.” Journal of Accounting Research 43 (2005): 453-486. Expectations Management (via Public Forecasts) and Earnings Management Baginski, S., J. Hassell, and G. Waymire. “Some Evidence on the News Content of Preliminary Earnings Estimates.” The Accounting Review (January 1994): 265-273. Soffer, L., S. Thiagarajan, and B. Walther. “Earnings preannouncement strategies.” Review of Accounting Studies 5 (2000): 5-26. Kasznik, R. “On the association between voluntary disclosure and earnings management.” Journal of Accounting Research 37 (1999): 57-81. Wasley, C., and J. Wu. “Why do managers voluntarily issue cash flow forecasts? Journal of Accounting Research (May 2006): 389-430. Cotter, J., I. Tuna, and P. Wysocki. “Expectations management and beatable targets: How do analysts react to explicit earnings guidance?” Forthcoming, Contemporary Accounting Research (2006). Conference Calls, Information Intermediaries, and Market Efficiency Bowen, R., A. Davis, and D. Matsumoto. “Do conference calls affect analysts’ forecasts?” The Accounting Review 77 (April 2002): 285-316. Kimbrough, M. “The effect of conference calls on market and analyst underreaction to earnings announcements.” The Accounting Review (2005). Disclosure Regulation Effects

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Ali, A., and S. Kallapur. “Securities price consequences of the Private Securities Litigation Reform Act of 1995.” The Accounting Review 76 (July 2001): 431-460. Bailey, W., H. Li, C. Mao, and R. Zhong. “Regulation fair disclosure and earnings information: market, analyst, and corporate responses.” Journal of Finance (2003). Bushee, B., D. Matsumoto, and G. Miller. “Managerial and investor responses to disclosure regulation: The case of Reg FD and conference calls.” The Accounting Review (2004) Wang, I. “Private Earnings Guidance and Its Implications for Disclosure Regulation.” The Accounting Review (October 2007). Chen, S., D. Matsumoto, and S. Rajagopal. “Is silence golden? An empirical analysis of firms that stop giving earnings guidance.” Working paper, University of Washington, 2005. Huston, J., B. Lev, and J. Tucker. “To guide or not to guide? Causes and consequences of stopping and subsequently resuming earnings guidance.” Working paper, The University of Florida, 2006. (2007 working paper now available from Tucker). The Impact of Disclosure on Firm Value and Cost of Capital Lang, M. and R. Lundholm, “Corporate disclosure policy and analyst behavior,” The Accounting Review (October 1996): 467-492. Healy, P., A. Hutton, and K. Palepu. “Stock performance and intermediation changes surrounding sustained increases in disclosure.” Contemporary Accounting Research (Fall 1999): 485-520. Bushee, B., and C. Noe. “Corporate disclosure practices, institutional investors, and stock return volatility.” Journal of Accounting Research 38 (Supplement 2000): 171-208. Leuz, C., and R. Verrecchia. “The economic consequences of increased disclosure.” Journal of Accounting Research 38 (Supplement 2000): 91-136. Botosan, C., “Disclosure level and the cost of equity capital.” The Accounting Review 72 (July 1997): 323-350. Botosan, C. and M. Plumlee. “A re-examination of disclosure level and the expected cost of equity capital.” Journal of Accounting Research 40 (March 2002): 21-40. The Effects of Disclosure on the Relationship Between Earnings and Returns Francis, J., K. Schipper, and L. Vincent. “Earnings announcements and competing information.” Journal of Accounting and Economics 33 (August 2002): 313-342. Lundholm, R., and L. Myers. “Bringing the future forward: The effect of disclosure on the returns-earnings relation.” Journal of Accounting Research 40 (June 2002): 809-840. Francis, J., K. Schipper, and L. Vincent. “Earnings disclosures and the increased usefulness of earnings

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announcements.” The Accounting Review 77 (July 2002): 515-546. Chen, S., M. Defond, and C. Park. “Voluntary disclosure of balance sheet information in quarterly earnings announcements.” Journal of Accounting and Economics 33 (June 2002): 229-251. Atiase, R., H. Li, S. Supattarakul, and S. Tse. “Market reaction to multiple contemporaneous earnings signals: Earnings announcements and future earnings guidance.” Review of Accounting Studies (2005): 497-525.