We show that tests of market efficiency are sensitive to the inclusion of delisting firm-years. When included, trading strategy returns based on anomaly variables can increase (for strategies based on earnings, cash flows and the book-to-market ratio) or decrease (for a strategy based on...

Using a hazard model, we examine secular changes in the ability of financial statement data to predict bankruptcy over a forty-year period. We identify three trends in financial reporting that could influence predictive ability with respect to bankruptcy: the increase in FASB standards, many of...

We show that the asymmetric effects of income taxes and special items for profit and loss firms contribute substantially to a discontinuity at zero in the distribution of earnings. Income taxes draw profit observations towards zero while negative special items pull loss observations away from...

We examine whether the properties of bond ratings from certified agencies (designated by the SEC) differ from those of non-certified bond rating agencies. Bond ratings from non-certified agencies are used solely for investment advice. Certified ratings are used by a variety of constituents, many...

This paper examines whether property-casualty insurance companies manage earnings to influence investor expectations at the time of equity issuances. Our tests focus on the discretionary component of a material accounting accrual recognized by property-casualty insurance companies, i.e., the...

We examine whether the properties of bond ratings from certified agencies (designated by the SEC) differ from those of non-certified bond rating agencies. Bond ratings from non-certified agencies are used solely for investment advice. Certified ratings are used by a variety of constituents, many...

The price-earnings relation can be characterized as a system of simultaneous equations. Earnings may change for reasons that do not lead to price changes and vice versa. Hence each behaves as if it is quot;measured with errorquot; for purposes of estimating the sensitivity coefficients....

We distinguish two sources of variation in the book-to-market ratio (BTM) -- bias and lags -- with different implications for future book return on equity (ROE). We hypothesize that the bias and lag components of the BTM both have negative implications for future ROE, but the bias component's...

This study examines characteristics and valuation of claim loss reserves of property casualty insurers. Using SEC disclosures of revisions (development) in loss reserve estimates, we document substantial serial correlation in loss reserve development, indicating that reported loss reserves do...

We show that tests of market efficiency are sensitive to the inclusion of delisting firm-years. When included, trading strategy returns based on anomaly variables can increase (for strategies based on earnings, cash flows and the book-to-market ratio) or decrease (for a strategy based on...