We examine whether fair value accounting applied to goodwill impairment leads to unintended consequences. Under the fair-value-based goodwill impairment test, a firm's market value is often used as an important reference point for determining whether goodwill is impaired. A below-one...

We examine whether financial analysts understand the valuation implications of unconditional accounting conservatism when forecasting target prices. While accounting conservatism affects reported earnings, conservatism per se does not have an effect on the present value of future cash flows. We...

This paper derives theoretical explanations for the increase in the returns-earnings R2 as earnings are aggregated over longer windows. Consistent with our intuition, the model shows that aggregation is useful because accounting lags cancel out over time, thus improving the returns-earnings...

This paper examines the performance of a 'composite' model of earnings prediction that integrates current earnings and current price as predictors of next year's earnings. The results show that current earnings (current price) play a key role in predicting future earnings when the ratio of...

This paper tests whether managers repurchase stock when their assessment of the firm's economic value exceeds the market value. Using the forecasts managers would have if they had perfect foresight, we estimate economic value using an earnings-based valuation model. The major findings are as...

The weak correlation between accounting earnings and security returns documented by numerous empirical studies is an issue of concern in current accounting research. Given that price is determined not solely by accounting earnings but also by other sources of information about future earnings,...