We investigate the relation between dividend changes and future profitability, measured in terms of either future earnings or future abnormal earnings. Supporting "the information content of dividends hypothesis," we find that dividend changes provide information about the level of profitability...

In this study, we use cross-sectional regressions to estimate the value of the debt tax shield. Recognizing that debt is correlated with the value of operations along nontax dimensions, we estimate reverse regressions in which we regress future profitability on firm value and debt rather than...

This study investigates whether banks manage the disclosed fair value of their major asset, the loan portfolio. Using two cross-section samples, I find evidence that suggests banks manage the fair value of loans. The estimated extent of overstatement of loans' fair value is negatively related to...

Standard valuation methods do not lend themselves to bank holding companies. Banks create value through the types of assets and liabilities they create (e.g., lending and deposit taking relationships). Bank income streams reflect heterogeneous sources of income which differ in their margins of...

Contrary to the common perception that operating cash flows are better than accounting earnings at explaining equity valuations, recent studies suggest that valuations derived from industry multiples based on reported earnings are closer to traded prices than those based on reported operating...

The accruals anomaly - the negative relationship between accounting accruals and subsequent stock returns - has been well documented in the academic and practitioner literatures for almost a decade. To the extent that this anomaly represents market inefficiency, one would expect sophisticated...

Prior research generally finds that firms underreport option expense by managing assumptions underlying option valuation (e.g. they shorten the expected option lives), but it fails to document management of a key assumption, the one concerning expected stock-price volatility. Using a new...

Numerous studies have documented that stock returns are negatively related to changes in interest rates, but there has been little corroborating research on the information in interest rate changes about the fundamentals which the stock market prices. The negative correlation is often attributed...

This paper presents a financial statement analysis that distinguishes leverage that arises in financing activities from leverage that arises in operations. The analysis yields two leveraging equations, one for borrowing to finance operations and one for borrowing in the course of operations....