This paper investigates the possibility of false signaling by firms announcing open-market stock repurchases. We examine a sample of 281 open-market share repurchases, with the self-styled reason of undervaluation, by firms between 1993 and 1998. Our results showed no evidence of an upward...

We examine market participants' reactions to dividend changes conditional on earnings quality. We define earnings quality as the extent to which current earnings are associated with one-year, two-year, or three-year ahead operating cash flows. Controlling for the magnitude of the dividend...

Prior research on meeting or beating earnings expectations focuses on managers' incentives to keep stock prices inflated by avoiding negative earnings surprises. However, in certain situations, managers may be motivated to depress stock prices in order to maximize their utility. We hypothesize...

This paper investigates the role of earnings per share management in the decision to repurchase shares. We identify the conditions under which repurchases increase EPS and document the frequency of EPS increasing and EPS decreasing repurchases among U.S. firms from 1988 to 2001. We then compare...

We use earnings forecasts from a cross-sectional model to proxy for cash flow expectations and estimate the implied cost of capital (ICC) for a large sample of firms over 1968-2008. The earnings forecasts generated by the cross-sectional model are superior to analysts' forecasts in terms of...

We correlate analysts' forecast errors with temporal variation in investor sentiment. We find that when sentiment is high, analysts' forecasts of one-year-ahead earnings and long-term earnings growth are relatively more optimistic for “uncertain” or “difficult to value” firms. Adding...

The primary question addressed in this study is whether firm-specific ERCs - i.e., slope coefficients obtained from time-series regressions of abnormal returns on earnings surprises - are helpful in predicting price responses to future earnings surprises. Fundamental analysis involves both...

DuPont analysis, a common form of financial statement analysis, decomposes return on net operating assets into two multiplicative components: profit margin and asset turnover. These two accounting ratios measure different constructs and, accordingly, have different properties. Prior research has...

This paper examines the consequences of expectations management for the usefulness of analyst forecasts in firm valuation. Specifically, I compare the performances of valuation models estimated using manipulated versus non-manipulated forecasts to predict firms' intrinsic values. The results...

We examine the role of investment opportunities as a determinant of the relative importance of cash flows from operations (CFO) and accruals in firm valuation. We find that at low investment-opportunity levels, CFO value-relevance increases with investment opportunities. When investment...