TheEconomicImplicationsofCorporateFinancialReporting.ppt
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• Interview 20 CFOs
– 40-90 minutes in length – More give and take than in the survey – Interviewed firms are much larger, more levered and more
profitable than the average Compustat firm.
Voluntary disclosure
Earnings benchmarks Sec 3.2, Table 3
Earnings trends:
Why disclose? Sec 6.1,Table 11
Timing Sec 6.3 Table 13
Why not disclose? Sec 6.2, Table 12
economic motivations (e.g., size) • Often a narrow focus on one motivation
9
Graham/Harvey/Rajgopal: Corporate Reporting
Method
Survey and Interview Design • Draft survey instrument “refereed” by both finance
Comparison to archival empirical work
Limitations to existing research include
• Earnings management and voluntary disclosure hard to measure
• Rank ordering among various motivations difficult • Variable with least measurement error may dominate • Same r.h.s. variables can proxy for different
11
Graham/Harvey/Rajgopal: Corporate Reporting
Sample
Firm characteristics (self reported) • Agency
– CEO age, tenure, education – Inside ownership
• Size
2
Graham/Harvey/Rajgopal: Corporate Reporting
Background
1. Graham and Harvey conduct a survey on capital structure and project evaluation
– “Theory and Practice of Corporate Finance: Evidence from the Field” appears in JFE 2001
Strengths and limitations
Strengths: • Surveys enable us to ask decision-makers specific qualitative
questions about motivations • Less of a variable specification problem • Complements large sample analyses • A unique angle to confront theories with data
• Relative to Compustat firms
– Surveyed firms are larger, more levered, greater dividendyield, fewer firms report negative earnings
– Similar B/M and positive P/E
2. Brav, Graham, Harvey & Michaely survey on dividend and repurchase policy
– “Payout Policy in the 21st Century” forthcoming in JFE 2004
3. Graham, Harvey and Rajgopal survey on corporate financial reporting
– Profitability – Leverage
• Informational effects
– Public/private – Which stock exchange
• Industry • Credit rating
13
Graham/Harvey/Rajgopal: Corporate Reporting
September 28, 2004 University of Chicago
The Economic Implications of Corporate Financial Reporting
John R. Graham
Duke University, Durham, NC USA
Campbell R. Harvey
Why meet benchmarks? What if miss benchmarks?
theory matter to its validity – goal is “narrow predictive success”
5
Graham/Harvey/Rajgopal: Corporate Reporting
Methodology
Alternative view, Daniel Hausman (1992) • “No good way to know what to try when a
methods: archival empirical work and theory
4
Graham/Harvey/Rajgopal: Corporate Reporting
Methodology
Approach contrasts with Friedman’s (1953) “The Methodogy of Positive Economics”
Limitations: • Questions may be misunderstood • Truthful responses? • Non-response bias • Friedman (1953)
8
Graham/Harvey/Rajgopal: Corporate Reporting
Insight on following issues: • Importance of reported earnings and earnings
benchmarks • Are earnings managed? How? Why?
– Real versus accounting earnings management – Does missing consensus indicate deeper problems?
and accounting researchers as well as experts in survey design • Interviewed structured to adhere to best scientific practices of interviews, e.g. Sudman and Bradburn (1983) • IRB certification for human subject research
• Goals of positive science are predictive • Don’t reject theory based on “unrealistic
assumptions” • Also, rejects notion that all the predictions of a
– Note positive relation between whether you give guidance and number of analysts (Lang and Lundholm TAR 1996)
14
源自文库
Corporate Financial Reporting
Performance measurements (earnings, cash flows): Sec 3.1,Table 2
– Revenues – Number of employees
• Growth opportunities
– P/E – Growth in earnings
12
Graham/Harvey/Rajgopal: Corporate Reporting
Sample
Firm characteristics (self reported) • Free cash flow effects
Sample
Firm characteristics (self reported) • Financial reporting practices
– Number of analysts – Do they give “guidance”?
• Ticker symbol!
Demographic correlations in Table 1
• Consequences of missing earnings targets • Importance of earnings paths • Why make voluntary disclosures?
7
Graham/Harvey/Rajgopal: Corporate Reporting
prediction fails or whether to employ a theory in a new application without judging its assumptions.”
6
Graham/Harvey/Rajgopal: Corporate Reporting
Narrow goals
Background
• In 1995, Duke and Financial Executives International make a deal to conduct a quarterly CFO survey
• The deal allows for some special ‘academic’ surveys outside of the quarterly survey that would use the FEI e-mail list
10
Graham/Harvey/Rajgopal: Corporate Reporting
Sample
• 401 usable survey responses
– response rate of 10.4%
• 25% response rate at a practitioner conference • 8% response rate to Internet survey
3
Graham/Harvey/Rajgopal: Corporate Reporting
Methodology
General goals our research program: • To examine assumptions • To learn what people say they believe • To provide a complement to the usual research
Duke University, Durham, NC USA National Bureau of Economic Research, Cambridge, MA USA
Shiva Rajgopal
University of Washington, Seattle, WA USA
1
Graham/Harvey/Rajgopal: Corporate Reporting
– 40-90 minutes in length – More give and take than in the survey – Interviewed firms are much larger, more levered and more
profitable than the average Compustat firm.
Voluntary disclosure
Earnings benchmarks Sec 3.2, Table 3
Earnings trends:
Why disclose? Sec 6.1,Table 11
Timing Sec 6.3 Table 13
Why not disclose? Sec 6.2, Table 12
economic motivations (e.g., size) • Often a narrow focus on one motivation
9
Graham/Harvey/Rajgopal: Corporate Reporting
Method
Survey and Interview Design • Draft survey instrument “refereed” by both finance
Comparison to archival empirical work
Limitations to existing research include
• Earnings management and voluntary disclosure hard to measure
• Rank ordering among various motivations difficult • Variable with least measurement error may dominate • Same r.h.s. variables can proxy for different
11
Graham/Harvey/Rajgopal: Corporate Reporting
Sample
Firm characteristics (self reported) • Agency
– CEO age, tenure, education – Inside ownership
• Size
2
Graham/Harvey/Rajgopal: Corporate Reporting
Background
1. Graham and Harvey conduct a survey on capital structure and project evaluation
– “Theory and Practice of Corporate Finance: Evidence from the Field” appears in JFE 2001
Strengths and limitations
Strengths: • Surveys enable us to ask decision-makers specific qualitative
questions about motivations • Less of a variable specification problem • Complements large sample analyses • A unique angle to confront theories with data
• Relative to Compustat firms
– Surveyed firms are larger, more levered, greater dividendyield, fewer firms report negative earnings
– Similar B/M and positive P/E
2. Brav, Graham, Harvey & Michaely survey on dividend and repurchase policy
– “Payout Policy in the 21st Century” forthcoming in JFE 2004
3. Graham, Harvey and Rajgopal survey on corporate financial reporting
– Profitability – Leverage
• Informational effects
– Public/private – Which stock exchange
• Industry • Credit rating
13
Graham/Harvey/Rajgopal: Corporate Reporting
September 28, 2004 University of Chicago
The Economic Implications of Corporate Financial Reporting
John R. Graham
Duke University, Durham, NC USA
Campbell R. Harvey
Why meet benchmarks? What if miss benchmarks?
theory matter to its validity – goal is “narrow predictive success”
5
Graham/Harvey/Rajgopal: Corporate Reporting
Methodology
Alternative view, Daniel Hausman (1992) • “No good way to know what to try when a
methods: archival empirical work and theory
4
Graham/Harvey/Rajgopal: Corporate Reporting
Methodology
Approach contrasts with Friedman’s (1953) “The Methodogy of Positive Economics”
Limitations: • Questions may be misunderstood • Truthful responses? • Non-response bias • Friedman (1953)
8
Graham/Harvey/Rajgopal: Corporate Reporting
Insight on following issues: • Importance of reported earnings and earnings
benchmarks • Are earnings managed? How? Why?
– Real versus accounting earnings management – Does missing consensus indicate deeper problems?
and accounting researchers as well as experts in survey design • Interviewed structured to adhere to best scientific practices of interviews, e.g. Sudman and Bradburn (1983) • IRB certification for human subject research
• Goals of positive science are predictive • Don’t reject theory based on “unrealistic
assumptions” • Also, rejects notion that all the predictions of a
– Note positive relation between whether you give guidance and number of analysts (Lang and Lundholm TAR 1996)
14
源自文库
Corporate Financial Reporting
Performance measurements (earnings, cash flows): Sec 3.1,Table 2
– Revenues – Number of employees
• Growth opportunities
– P/E – Growth in earnings
12
Graham/Harvey/Rajgopal: Corporate Reporting
Sample
Firm characteristics (self reported) • Free cash flow effects
Sample
Firm characteristics (self reported) • Financial reporting practices
– Number of analysts – Do they give “guidance”?
• Ticker symbol!
Demographic correlations in Table 1
• Consequences of missing earnings targets • Importance of earnings paths • Why make voluntary disclosures?
7
Graham/Harvey/Rajgopal: Corporate Reporting
prediction fails or whether to employ a theory in a new application without judging its assumptions.”
6
Graham/Harvey/Rajgopal: Corporate Reporting
Narrow goals
Background
• In 1995, Duke and Financial Executives International make a deal to conduct a quarterly CFO survey
• The deal allows for some special ‘academic’ surveys outside of the quarterly survey that would use the FEI e-mail list
10
Graham/Harvey/Rajgopal: Corporate Reporting
Sample
• 401 usable survey responses
– response rate of 10.4%
• 25% response rate at a practitioner conference • 8% response rate to Internet survey
3
Graham/Harvey/Rajgopal: Corporate Reporting
Methodology
General goals our research program: • To examine assumptions • To learn what people say they believe • To provide a complement to the usual research
Duke University, Durham, NC USA National Bureau of Economic Research, Cambridge, MA USA
Shiva Rajgopal
University of Washington, Seattle, WA USA
1
Graham/Harvey/Rajgopal: Corporate Reporting