How do users of financial statements react to accounting ination会计信息使用者.pptx

1、How do users of financial statements react to accounting information?,Learning objectives,Compare and contrast capital markets research with behavioural research Describe the role of capital markets research in assessing the information content of earnings announcements and accounting disclosures Gi

2、ve an overview of what capital markets and behavioural research tell us about the extent to which financial accounting information and particular disclosures are useful to users,How this fits,We have examined positive theories of accounting and predicted what will happen under particular circumstanc

3、es, for example Positive Accounting Theory might lead us to predict that earnings management will take place We have examined some of the research evidence to examine whether it happens, for example what evidence is there to suggest that earnings management takes place and is influenced by managemen

4、t incentives We are now going to examine the research evidence which considers whether it matters, for example do accounting numbers or disclosures have an impact on stock prices,How do individuals or user groups react to accounting information,Can use capital market research to: assesses the aggreg

5、ate effect of financial reporting on investors considers only investors Can use behavioural research to: analyses individual responses to financial reporting examines decision-making by many groups e.g. bank managers, loan officers, auditors,Capital market research,3 things to understand,What can ca

6、pital markets research tell us about financial statements i.e. what questions have researchers tried to answer? In what ways have researchers examined these questions? What were the findings?,What can capital markets research tell us about financial statements?,Question : Is accounting information u

7、seful to investors? Measure the extent to which share prices react to accounting information - earnings announcements i.e. the release of financial statements. Measure the extent to which variability of returns (risk) is affected by financial information Can also measure reaction to other “events” b

8、ut this doesnt tell us anything directly about financial statements Earnings forecasts Mergers and acquisitions Audit reports Legislation e.g. Sarbanes-Oxley,Research around earnings announcements,Do investors react to information around earnings?,Ball and Brown (1968),tested whether firms with unex

9、pected increases in accounting earnings had positive abnormal returns, and firms with unexpected decreases had negative abnormal returns found: information contained in the annual report, prepared using historical cost was useful to investors 85-90% of earnings announcement is anticipated by investo

10、rs the share price moves gradually in the run up to the announcement and continues its movement after the announcement much of information is obtained from other sources,Further work around earnings announcements,Information content varies between countries and companies the more information in the

11、public domain the less pronounced the reaction to an earnings announcement US vs. Australia (Brown 1970) Share price reaction varies depending on whether the change is expected to be permanent or temporary do investors disregard one -offs (Elliott Mear and Firth 1987) studies questioned the provisio

12、n of current cost information, subjects relied more on historical cost information (Heintz 1973; McIntyre 1973),Research evidence - the presentation of information,different presentation formats found to influence users decisions including bar charts, line graphs, pie charts and tables Responses to

13、voluntary disclosures how do investors interpret contingent liability disclosures? (Kennedy, Mitchell & Sefcik 1998) Studies examining decision making by loan officers based on whether information is incorporated within the financial statements or included as footnotes found presentation made no dif

14、ference (Wilkins and Zimmer 1983),Limitations of behavioural research,research examining similar issues has generated conflicting results difficult to determine causes of inconsistencies settings of studies often different to real-world settings - students Can we generalise? very difficult to replicate cues available in the workplace small number of subjects often used,Assignment,You can use some of the research evidence to examine the following issues: Summarise the research e