We show that the standard notion of residual income (RI) does not fulfill additive coherence. This gives rise to ambiguities and inconsistencies. The pitfall resides in the capital charge, which blends a non-market value with a market rate. We solve the problem by using a capital charge based on...

Based on a unique arrangement of trading and disclosure times around earnings announcements in the Chinese stock market, we provide evidence of a striking overnight-intraday disparity in terms of the reaction to earnings news. Specifically, we find that the overnight period exhibits a strong and...

This report expands into early 2013 studies of the raw performance (profitability) of $457.6 billion of buybacks executed since 2000 by a sample of 232 corporations. The sample companies, drawn mainly from the technology sector, enjoy total equity market value today of $1.221 trillion. 75.0% of...

The causality relationships and cumulative impacts of the lags of earnings and the lags of capital expenditure on subsequent annual stock returns is examined using 40 different countries. The results suggest that there is a granger causality relationship from earnings to returns. Furthermore,...

Modigliani and Miller (M&M) proposed that investors forgo dividends, leaving the money available for reinvestment as retained earnings. This recommendation takes two parts: Proposition III, i.e., a dividend has no impact on market value, and Proposition IV, i.e., that financial policy is of no...

Working capital management (WCM) plays a significant role in company's operations. The aim of this research is to explain how working capital management affects profitability of Serbian companies measured by ROA indicator. In order to answer the question, a quantitative analysis of working...

Research Question/Issue: We examine the nature of the dynamic linkage (causality) between earnings and capital investment using firm-level data from around the world to see whether the legal environment, including corporate governance and monitoring mechanisms, and financial development are...

This paper studies the effects of interlocked boards of directors on voluntary disclosures, governance practices and earnings quality. The Canadian environment, where director interlocks are prevalent, is examined. A checklist of twenty voluntary disclosure measures from proxy statements is...

We investigate a previously overlooked type of non-tax cost associated with tax avoidance: the potential loss of earnings informativeness. Expected benefits from corporate tax planning include positive effects on after-tax earnings and an increase in firm value. However, tax avoidance can entail...

This paper aims to provide a foundation for the notion of economic rate of return and investigate its relations with accounting rates of return. Introducing the notion of depreciation class (the set of depreciation schedules with the same aggregate book value) it is shown that the mean of the...