Prior literature shows that earnings have come to explain less stock price movement over time, suggesting that firm fundamental information has become less important. In this paper, we replace earnings with earnings announcement returns as a measure of firm fundamental news and find that these...

This paper revises the standard interpretation of the book rate of return as a measure of profitability. Rather, due to conservative accounting, the book rate of return informs about risk and the expected return to the investor. In contrast to asset pricing research where the book rate of return...

This study provides evidence relevant for estimating and evaluating the terminal value term used in DCF valuation. Consistent with common practice, exit multiples based on EBITDA dominate those based on either net operating profit after tax (NOPAT) or net operating assets (NOA). However, both...

We investigate the impact of recurring fair value versus amortized cost measurement for accounting recognition purposes on the timeliness of insurers' other-than-temporary (OTT) impairments of non-agency residential mortgage-backed securities (NAMBS) around the 2007–2009 financial crisis....

Overproduction reduces cost of goods sold by spreading fixed costs over an inflated number of units. An estimate of the overproduction bias helps predict future profitability, and adjusting profitability measures to undo this distortion improves their explanatory power for future profitability....

Over the last thirty years there has been a strong positive trend in the magnitude of amortization charges, due to both economic and accounting changes. This trend has accelerated over the last decade, following the implementation of a revised accounting standard for business combinations....

This paper develops an analytically coherent yet parsimonious framework which explains market returns in terms of contemporaneous information. It anchors on the idea that valuation (static perspective) can be connected to the dynamics that explains returns, and vice versa. The framework requires...

Bank lending standards vary over time. Periods in which firms find it relatively easy to borrow are followed by periods in which banks scrutinize borrowers more and tighten lending. We predict that changes in lending standards affect the accounting conservatism of bank-dependent firms. Using (i)...

This study develops and evaluates a model that generates synthetic credit ratings using accounting and market based information. The model performs very well in explaining agency ratings, suggesting that fitted values for unrated companies are likely to be reasonably precise. In addition, the...

Estimating expected credit losses on banks' portfolios has long been difficult. The issue has become of increasing interest to academics and regulators, as the FASB and IASB consider new regulations for impairment of loans. This study develops a measure of the one-year-ahead expected rate of...