Does the market see through seasonal quarterly earnings patterns?
| Main Author: | |
|---|---|
| Language: | English |
| Published: |
University of Cincinnati / OhioLINK
2012
|
| Subjects: | |
| Online Access: | http://rave.ohiolink.edu/etdc/view?acc_num=ucin1337363575 |
| id |
ndltd-OhioLink-oai-etd.ohiolink.edu-ucin1337363575 |
|---|---|
| record_format |
oai_dc |
| spelling |
ndltd-OhioLink-oai-etd.ohiolink.edu-ucin13373635752021-08-03T06:15:34Z Does the market see through seasonal quarterly earnings patterns? Carlson, John M. Accounting earnings management seasonal quarterly earnings pattern earnings levels changes in earnings levels fourth quater reversal patterns <p>This study asks a very specific question: Does the market see through seasonal quarterly earnings patterns? The idea is motivated by the evidence presented in Das, Shroff, Zhang (2009) paper which investigated seasonal quarterly earnings patterns and found firms that had fourth quarter reversal patterns, as compared to matched controlled firms, had traits or characteristics that were similar to firms that were earmarked for earnings management using earlier testing procedures such as accruals testing (size, direction, and discretionary), special items and real earnings management.</p><p> Pervasive existence of fourth quarter reversal phenomenon is not necessarily a priori evidence that the market does not see through the phenomenon. Even if the market can see through the seasonal differencing pattern, management may use this as a tool to convey additional information. Income smoothing has been argued as a way to signal “good news” and as a way to dampen fluctuations around a perceived normal earnings number (Beidleman 1973; Graham et al. 2005). On the other hand, firms may want to fool the market in order to maintain an existing stock price, earn personal incentives for management, or minimize third-party interference (Schipper 1989; Healy and Wahlen 1999). Therefore, the market’s possible inability to notice and react to the reversal pattern would be consistent with the conventional wisdom of the earnings management literature.</p><p> Using an amended Easton and Harris (1991) model, I study whether the earnings variables are more informative based upon the seasonal differencing patterns by incorporating dummy variables, along with their respective interaction terms, to signify the first time the pattern occurs and a second set of dummies if the pattern repeats or reverses. </p><p>My results show the market sees the seasonal quarterly earnings pattern; in fact it identifies the pattern in advance via the alternative year-ends. The earning levels and changes in earnings variables are more informative but the earnings tend to are transitory, not permanent in nature. All other tests performed support these general conclusions.</p> 2012-09-27 English text University of Cincinnati / OhioLINK http://rave.ohiolink.edu/etdc/view?acc_num=ucin1337363575 http://rave.ohiolink.edu/etdc/view?acc_num=ucin1337363575 unrestricted This thesis or dissertation is protected by copyright: all rights reserved. It may not be copied or redistributed beyond the terms of applicable copyright laws. |
| collection |
NDLTD |
| language |
English |
| sources |
NDLTD |
| topic |
Accounting earnings management seasonal quarterly earnings pattern earnings levels changes in earnings levels fourth quater reversal patterns |
| spellingShingle |
Accounting earnings management seasonal quarterly earnings pattern earnings levels changes in earnings levels fourth quater reversal patterns Carlson, John M. Does the market see through seasonal quarterly earnings patterns? |
| author |
Carlson, John M. |
| author_facet |
Carlson, John M. |
| author_sort |
Carlson, John M. |
| title |
Does the market see through seasonal quarterly earnings patterns? |
| title_short |
Does the market see through seasonal quarterly earnings patterns? |
| title_full |
Does the market see through seasonal quarterly earnings patterns? |
| title_fullStr |
Does the market see through seasonal quarterly earnings patterns? |
| title_full_unstemmed |
Does the market see through seasonal quarterly earnings patterns? |
| title_sort |
does the market see through seasonal quarterly earnings patterns? |
| publisher |
University of Cincinnati / OhioLINK |
| publishDate |
2012 |
| url |
http://rave.ohiolink.edu/etdc/view?acc_num=ucin1337363575 |
| work_keys_str_mv |
AT carlsonjohnm doesthemarketseethroughseasonalquarterlyearningspatterns |
| _version_ |
1719433600296812544 |