Author
Stephan E. Sefcik
Other affiliations: Pepperdine University, University of British Columbia
Bio: Stephan E. Sefcik is an academic researcher from University of Washington. The author has contributed to research in topics: Valuation (finance) & Contingent liability. The author has an hindex of 16, co-authored 21 publications receiving 2069 citations. Previous affiliations of Stephan E. Sefcik include Pepperdine University & University of British Columbia.
Papers
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TL;DR: This article found that abnormal accounting accruals are unusually high around stock offers, especially high for firms whose offers subsequently attract lawsuits, and that such accrual reversals tend to reverse after stock offers and are negatively related to post-offer stock returns.
512 citations
TL;DR: In this article, the authors used cross-sectional regressions to test the association between abnormal security returns and firm characteristics using a three-step procedure: forecast model parameters are estimated, usually parameters of a market model; prediction errors or residuals are computed over an event period; and prediction errors are regressed cross-sectionally on firm characteristics hypothesized to influence the impact of the event on share values.
Abstract: Several recent event studies test hypotheses about the association between event-related abnormal security returns and firm characteristics using a three-step procedure.' First, forecast model parameters are estimated, usually parameters of a market model; second, prediction errors or residuals are computed over an event period; third, prediction errors are regressed cross-sectionally on firm characteristics hypothesized to influence the impact of the event on share values. Results of these regressions are used to draw inferences about the relation between abnormal returns and firm characteristics. Researchers who employ three-step procedures acknowledge that crosssectional (OLS) regressions lead to valid inferences if the disturbances are IID (normal) in cross-section; see, for example, Leftwich [1981, p. 23] and Lustgarten [1982, p. 138]. While sufficient assumptions to draw valid inferences from OLS regressions are clear, these assumptions are violated if there is cross-correlation and cross-sectional heteroscedasticity in the firm return processes from which the prediction errors are estimated. Assumptions about the processes generating these prediction
286 citations
TL;DR: In this article, the authors examine the role of earnings management by issuers prior to making initial public offerings (IPOs) and find that pre-IPO abnormal accruals are positively related to initial firm value.
Abstract: We examine the role of earnings management by issuers prior to making initial public offerings (IPOs). Our results indicate that pre-IPO abnormal accruals are positively related to initial firm value. Entrepreneurs may seek to increase their offering proceeds, temporarily deceiving investors by opportunistically manipulating earnings through accruals management before going public. This would imply a negative relationship between abnormal accruals around the offer date and subsequent firm performance. Confirming earlier studies, we find that abnormal accruals during the offer year are significantly negatively related to subsequent firm stock returns. In addition, we find that abnormal accruals in the preceding year are also significantly negatively related to subsequent performance. Moreover, this result persists even for returns that are risk-adjusted using the multifactor CAPM of Eckbo, Masulis, and Norli (2000). Thus, it appears that aggressive pre-IPO earnings management both increases IPO proceeds an...
284 citations
TL;DR: In this paper, the authors investigate the implication of clientele theories that changes in dividend policy should result in a marked increase in trading volume as shareholder clienteles change and find that volume increases primarily in response to the signal about future earnings contained in the dividend.
249 citations
TL;DR: In this paper, the authors examine empirically the role played by direct disclosure in the valuation of initial public offerings (IPOs) and investigate why some firms making an initial public offering in Canada include an earnings forecast in the offering prospectus and others do not, and the role of such direct disclosures in IPO valuation.
Abstract: . This study examines empirically the role played by direct disclosure in the valuation of initial public offerings (IPOs). We investigate why some firms making an initial public offering in Canada include an earnings forecast in the offering prospectus and others do not, and, in particular, the role of such direct disclosures in IPO valuation. We explore several hypotheses motivated by the voluntary disclosure and signaling literatures. Our results are consistent with the hypotheses that (1) forecasters have “good news” to reveal about future earnings prospects relative to nonforecasters, (2) the earnings forecast signals are valuation relevant, and (3) the market is able to correct for expected forecast error or bias in the earnings forecast.
Resume. Les auteurs font une analyse empirique du role que joue la presentation directe d'information dans l'evaluation des premiers appels publics a lepargne. Ils se penchent sur les raisons pour lesquelles certaines societes qui font appel public a l'epargne au Canada integrent a leur prospectus d'emission des previsions de benefices, alors que d'autres ne le font pas, et ils s'interessent en particulier au role de la presentation directe de ce genre d'information dans l'evaluation d'un premier appel public a l'epargne. Ils examinent plusieurs hypotheses inspirees d'ouvrages traitant de presentation volontaire d'information et d'indicateurs. Les resultats obtenus sont conformes aux hypotheses selon lesquelles 1) ceux qui font etat de previsions ont de l'information positive a communiquer au sujet des perspectives de benefices, contrairement a ceux qui ne font etat d'aucune prevision, 2) les indicateurs que representent les previsions de benefices sont pertinents a l'evaluation et 3) le marche a la capacite de corriger l'information qu'il recoit pour tenir compte des erreurs ou des distorsions anticipees dans les previsions de benefices.
217 citations
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TL;DR: In this paper, the authors examined whether audit committee and board characteristics are related to earnings management by the firm and found a negative relation between audit committee independence and abnormal accruals.
3,298 citations
TL;DR: This paper pointed out that the "quality" of earnings is a function of the firm's fundamental performance and suggested that the contribution of a firms fundamental performance to its earnings quality is suggested as one area for future work.
Abstract: Researchers have used various measures as indications of "earnings quality" including persistence, accruals, smoothness, timeliness, loss avoidance, investor responsiveness, and external indicators such as restatements and SEC enforcement releases. For each measure, we discuss causes of variation in the measure as well as consequences. We reach no single conclusion on what earnings quality is because "quality" is contingent on the decision context. We also point out that the "quality" of earnings is a function of the firm's fundamental performance. The contribution of a firm's fundamental performance to its earnings quality is suggested as one area for future work.
2,633 citations
TL;DR: In this paper, the authors reviewed previous and current research on the relation between price changes and trading volume in financial markets, and made four contributions: two empirical relations are established: volume is positively related to the magnitude of the price change and, in equity markets, to the price changes per se.
Abstract: This paper reviews previous and current research on the relation between price changes and trading volume in financial markets, and makes four contributions. First, two empirical relations are established: volume is positively related to the magnitude of the price change and, in equity markets, to the price change per se. Second, previous theoretical research on the price-volume relation is summarized and critiqued, and major insights are emphasized. Third, a simple model of the price-volume relation is proposed that is consistent with several seemingly unrelated or contradictory observations. And fourth, several directions for future research are identified.
2,572 citations
TL;DR: In this paper, the authors point out that the quality of earnings is a function of the firm's fundamental performance and suggest that the contribution of a firms fundamental performance to its earnings quality is suggested as one area for future work.
2,140 citations
TL;DR: This paper reviewed empirical research on the relation between capital markets and financial statements and found that the principal sources of demand for capital markets research in accounting are fundamental analysis and valuation, tests of market efficiency, and the role of accounting numbers in contracts and the political process.
1,873 citations