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1 – 10 of over 26000It has long been recognised that cohort and cross‐sectional age‐earnings profiles differ. A standard procedure, which is quite reasonable in the absence of more information, is to…
Abstract
It has long been recognised that cohort and cross‐sectional age‐earnings profiles differ. A standard procedure, which is quite reasonable in the absence of more information, is to obtain a cohort profile by simply adding the general rate of growth of real earnings to the growth of earnings associated with age, as shown by cross‐sectional data. Indeed, this would seem to be supported by the observation that cross‐sectional earnings profiles for a number of different years show a great deal of stability in their general shape. The main question considered here is whether cohort profiles can in fact be estimated in this simple way. A basic statistical model of age‐earnings profiles is described in the next section. The model is then applied to several groups of professional scientists, chemists and physicists in Britain and Australia, in the third section. The data were obtained from special surveys of career histories and are described briefly in the Appendix. A feature of the surveys is that sufficient data were collected to enable separate analyses of male and female scientists to be carried out.
H. Young Baek, Dong‐Kyoon Kim and Joung W. Kim
The aim of this paper is to investigate the effect of management earnings forecasts on the level of information asymmetry around subsequent earnings announcement.
Abstract
Purpose
The aim of this paper is to investigate the effect of management earnings forecasts on the level of information asymmetry around subsequent earnings announcement.
Design/methodology/approach
Employing the adverse selection cost method suggested by George et al., the paper compares for each sample firm the adverse selection cost around earnings announcement in forecasting years with that in non‐forecasting years.
Findings
Consistent with Diamond and Verrecchia is the finding that the earnings announcement in non‐forecasting years decreases information asymmetry during a three‐day announcement period and increases in a post‐announcement period up to seven days. No significant change in information asymmetry between pre‐ and post‐announcement periods when firms released a “good” news forecast is found. The firms that previously released a “bad” news forecast experience a significantly lower information asymmetry than those that did not forecast during announcement or post‐announcement days, and experience a decrease in information asymmetry in a five to seven‐day post‐announcement period.
Originality/value
This paper provides the first empirical reports on the different information asymmetry changes around earnings announcements followed by a “good” news management forecast from those followed by a “bad” news forecast.
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Hardjo Koerniadi and Alireza Tourani‐Rad
The purpose of this paper is to extend the literature on earnings management by examining whether stock dividends provide management with an incentive to manipulate earnings.
Abstract
Purpose
The purpose of this paper is to extend the literature on earnings management by examining whether stock dividends provide management with an incentive to manipulate earnings.
Design/methodology/approach
This paper employs a refined accrual model that controls the performance effects in estimating the part of accruals subject to managerial discretion.
Findings
Stock dividend issuing firms increase accruals substantially in the issue year followed by poor earnings and stock price performance in the subsequent year. More importantly, discretionary accruals of stock dividend issuing firms are negatively correlated with the declines in both future earnings and abnormal stock returns.
Originality/value
This paper examines the hypothesis that stock dividend firms engage in earnings management.
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Despite certain improvements in the relative position of working women in Greece in recent years, there are still significant female‐male earnings differentials in all sectors and…
Abstract
Despite certain improvements in the relative position of working women in Greece in recent years, there are still significant female‐male earnings differentials in all sectors and industries of the economy. As can be seen from Table I, the earnings of women in most manufacturing industries in 1984 were way below the earnings of men, particularly in the case of salaried employees. Comparing the female‐male earnings ratios for 1976 and 1984 we see an improvement in women's relative position but the gender gap still remained quite large in 1984.
John Goddard, David G. McMillan and John O.S. Wilson
We test for the validity of the smoothing and signalling hypotheses of dividend determination.
Abstract
Purpose
We test for the validity of the smoothing and signalling hypotheses of dividend determination.
Design/methodology/approach
Using a VAR framework we examine the dynamic behaviour of share prices, dividends and earnings for 137 UK manufacturing and service companies, observed over the period 1970‐2003.
Findings
There is strong evidence of a contemporaneous relationship between prices, dividends and earnings, and little evidence of independence between these variables. Some evidence in favour of both the smoothing and the signalling hypothesis is obtained from causality tests, with perhaps more support for the latter hypothesis. However, there is considerable diversity in the causal relationships between prices, dividends and earnings.
Research limitations/implications
No single hypothesis regarding the determination of dividends, and the predictive power of dividends for earnings and prices appears to dominate.
Originality/value
The results presented here are of interest to markets agents in that while they suggest there is no single transition mechanism linking prices, dividends and earnings, nevertheless these three variables are strongly correlated and exhibit varying degrees of causality.
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Although the academic research on the quality of earnings has been improved by presenting different approaches of measurement, there is no agreed‐upon generally accepted approach…
Abstract
Purpose
Although the academic research on the quality of earnings has been improved by presenting different approaches of measurement, there is no agreed‐upon generally accepted approach to measure the earning quality. Aims to present results of an empirical study measuring the quality of earnings on companies listed in NYSE.
Design/methodology/approach
Uses a sample of 90 companies listed in the NYSE. The analysis is directed to reach a general assessment of the quality of earnings if there is a complete consistency among the three approaches, and if not, the quality of earnings is questionable and needs further analysis and investigations.
Findings
The results show that different approaches of measuring the quality of earning lead to different assessment, and one industry or one company can not be labeled as having low or high quality of earning based on the result of one approach only. The results also suggest that the stakeholders before making any financing, investing decision or taking any corrective action, have to use more than one approach to assess the quality of earnings.
Originality/value
Indicates that financial analysts and governmental agencies dealing with companies should apply more than one measure for the quality of earning in order to have strong evidence about the level of quality before taking any corrective action or making any decision related to those companies.
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Khaled Hussainey and Jinan Aal‐Eisa
The purpose of this paper is to examine whether voluntary disclosure and dividends signal future earnings for decline earnings growth firms. It seeks to inform regulators (and…
Abstract
Purpose
The purpose of this paper is to examine whether voluntary disclosure and dividends signal future earnings for decline earnings growth firms. It seeks to inform regulators (and managers) about the potential benefits of increased disclosure and increased dividends to investors for firms that suffer an earnings decline after a sustained period of annual earnings growth.
Design/methodology/approach
The event study methodology is used to examine the behaviour of 33 non‐financial UK firms after a decline of their sustained earnings growth. It also uses the computerised content analysis to count the number of forward‐looking sentences in the annual report narratives. It calculates changes in disclosure and dividends in the year of earnings growth declines and examine their association with the abnormal future earnings.
Findings
Consistent with prior research, it is found that increasing dividends does not convey value relevant information about future earnings for decline earnings growth firms. However, based on disclosure signalling theory, it is found that increasing levels of forward‐looking information in annual report narratives is an important mechanism for signalling future earnings for these firms.
Practical implications
For an effective communication with the stock market in the years of earnings decline after sustained period of growth, managers should give high priority to developing an appropriate and complete set of forward‐looking information in their annual reports. This will enable investors to better anticipate firms' future prospects. The results suggest that if forward‐looking statements in annual report narratives contain value relevant information for investors, then regulators should consider a compulsory narrative section (i.e. operating and financial review) in the annual report.
Originality/value
This paper is the first to study the value relevance of voluntary disclosure for decline earnings growth firms.
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The purpose of this paper is to investigate the influence of the predicted earnings differential between self‐employment and wage‐employment on self‐employment propensities in…
Abstract
Purpose
The purpose of this paper is to investigate the influence of the predicted earnings differential between self‐employment and wage‐employment on self‐employment propensities in Sweden using a large data set from the year 2003.
Design/methodology/approach
The analysis in the paper is based on the presumption that the individual chooses to work in either the self‐employed or the wage‐employed sector. The separate earnings functions for the self‐employed and the wage‐employed are estimated in order to predict an individual's earnings in each sector. In order to overcome selectivity problems a Heckman approach is used at this stage. Finally, a structural probit model, where the difference in predicted earnings from the two sectors is included as an independent variable, is estimated.
Findings
The main result is that the predicted differential between self‐employment and wage‐employment earnings plays an important role for the self‐employment decision and that an increase in this earnings differential will lead to a higher self‐employment rate and to an increase in total employment in Sweden.
Originality/value
The policy relevance of this question is evident since previous research has shown that self‐employed individuals do not only create jobs for themselves but also for others. Thus, an increase in the earnings from self‐employment relative to the earnings from wage‐employment will increase the self‐employment rate as well as total employment.
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Fouad K. AlNajjar and Ahmed Riahi‐Belkaoui
The article hypothesizes that the level of reputation affects both the informativeness of earnings and the magnitude of discretionary accounting accrual adjustments. The…
Abstract
The article hypothesizes that the level of reputation affects both the informativeness of earnings and the magnitude of discretionary accounting accrual adjustments. The hypothesis exploits the following: the positive relationship between reputation and firms' risk‐return profiles, and managers' incentives in using discretionary accounting accrual adjustments. Results show that reputation is positively associated with earnings' explanatory power for returns, and related to the magnitude of accounting accrual adjustments.
The purpose of this paper is to examine the long-run survival of earnings fixated traders.
Abstract
Purpose
The purpose of this paper is to examine the long-run survival of earnings fixated traders.
Design/methodology/approach
This paper builds a theoretical model of a competitive securities market where both rational traders and earnings fixated traders receive an informational signal about the asset payoff before any trade occurs. Since earnings fixated traders underestimate the mean and variance of the risky asset payoff, earnings fixated traders is shown to make less expected profits than rational traders.
Findings
If traders’ types replicate according to the relative profitability of their trading strategies, then earnings fixated traders will disappear in the long run. The results of this paper provide analytical support to Tinic’s (1990) intuition about the eventual disappearance of earnings fixated traders.
Research limitations/implications
In the literature, the underestimation of risk is popularly viewed as the cause of irrational traders being better able to exploit the misvaluations (created by noise traders) than rational traders. Hence, it favors the survival of irrational traders over rational traders. However, this paper disapproves this intuition in the informational environment of the competitive securities market.
Practical implications
The market environment plays a crucial role in determining the long-run survival of irrational traders.
Originality/value
This paper is the first to present a theoretical result showing that in this informational environment of the competitive securities market, the underestimation of risk by irrational traders does not give them advantage over rational traders in exploiting the misvaluations (created by noise traders) as it does in Callen and Luo (2011) and Hirshleifer and Luo (2001).
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