Résultat de la recherche
Why have measures of earnings quality changed over time? A competing narrative
We contribute to the debate on the reason for the decline in earnings quality (EQ) documented by prior literature. We dissent from Srivastava (2014)’s conclusion that “each new cohort of listed firms exhibits lower earnings quality than its predecessors, mainly because of higher intangible intensity”. Instead, we argue that the downward trend in EQ measures is explained by changes in firms’ economic risk and operational efficiency associated with “broadening of the kinds of firms publicly traded” (Fama and French (2004)). The association of intangible intensity to EQ measures is spurious and disappears when controlling for the mentioned firm’s characteristics.
The ebbing of accrual accounting
This paper investigates the evolution of accruals ability to improve the information content of earnings over cash flows, as reflected in market prices. We documented a pronounced decline in the price association of earnings relative to cash flows. We find that, after year 2000, cash flows have informed prices at least as much as earnings. We explain the decline in earnings price association through the decrease of the timing role of accruals related to the growth in the frequency and the magnitude of non-timing accruals (Bushman et al. 2016). Our results imply that this evolution of accruals has severely limited the information content of earnings and, consequently, significantly weakened the pertinence of accrual accounting to prices.
Accounting information vs. analysts forecasts in market’s expectations formation
We find that the expectations about future earnings incorporated in prices are mainly informed by the analysts earnings forecasts. Neither the stock nor the flow accounting items considered do not contribute significantly to shaping investors price setting expectations.