Journal ArticleDOI
Forecasting Profitability And Earnings
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In this paper, a simple partial adjustment model with a uniform rate of mean reversion misses rich non-linear patterns in the behavior of profitability and produces predictable variation in earnings, and the authors provide corroborating evidence.Abstract:
There is a strong presumption in economics that, in a competitive environment, profitability is mean reverting. We provide corroborating evidence. In a simple partial adjustment model, the estimated rate of mean reversion is about 40 percent per year. But a simple partial adjustment model with a uniform rate of mean reversion misses rich non-linear patterns in the behavior of profitability. Specifically, we find that mean reversion is faster when profitability is below its mean and when it is further from its mean in either direction. We also show that the mean reversion in profitability produces predictable variation in earnings.read more
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The Impact of Corporate Sustainability on Organizational Processes and Performance
TL;DR: In this paper, the authors investigate the effect of corporate sustainability on organizational processes and performance and find that corporations that voluntarily adopted sustainability policies by 1993 exhibit by 2009 distinct organizational processes compared to a matched sample of companies that adopted almost none of these policies - termed as Low Sustainability companies.
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Corporate Governance, Accounting Outcomes, and Organizational Performance
TL;DR: In this article, the authors examined the association between typical measures of corporate governance and various accounting and economic outcomes and found that these mixed results are partially attributable to the difficulty in generating reliable and valid measures for the complex construct that is termed corporate governance.
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Simple Formulas for Standard Errors that Cluster by Both Firm and Time
TL;DR: In this article, it is shown that it is easy to calculate standard errors that are robust to simultaneous correlation across both firms and time, and that any statistical package with a clustering command can be used to easily calculate these standard errors.
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Issues in linking information technology capability to firm performance
Radhika Santhanam,Edward Hartono +1 more
TL;DR: Results indicate that firms with superior IT capability indeed exhibit superior current and sustained firm performance when compared to average industry performance, even after adjusting for effects of prior firm performance, but differences in the results suggest that the impact of "halo effects" and prior financial performance of firms must be taken into consideration in future tests of IT capability.
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Capital Markets Research in Accounting
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.
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Journal ArticleDOI
Risk, Return, and Equilibrium: Empirical Tests
Eugene F. Fama,James D. MacBeth +1 more
TL;DR: In this article, the relationship between average return and risk for New York Stock Exchange common stocks was tested using a two-parameter portfolio model and models of market equilibrium derived from the two parameter portfolio model.
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Dividend Policy, Growth, and the Valuation of Shares
TL;DR: In this paper, the effect of differences in dividend policy on the current price of shares in an ideal economy characterized by perfect capital markets, rational behavior, and perfect certainty is examined.
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The conservatism principle and the asymmetric timeliness of earnings1
TL;DR: In this paper, the authors interpret conservatism as resulting in earnings reflecting "bad news" more quickly than "good news" and find that negative earnings changes are less persistent than positive earnings changes.
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An analysis of intertemporal and cross-sectional determinants of earnings response coefficients
TL;DR: In this article, the authors predict and document evidence that the earnings response coefficient is a function of riskless interest rates and the riskiness, growth and/or persistence of earnings.
Journal ArticleDOI
Cross-sectional variation in the stock market response to accounting earnings announcements☆
TL;DR: In this article, a random coefficient regression model is used to interpret multiple regression models that relate abnormal returns to unexpected earnings and other information variables, and the results show that the model is consistent with these predictions.