Objectives of Financial Statements-the Trueblood Report, Accounting, Economic decisions, Accounting problems

We document that earnings acceleration, defined as the quarter-over-quarter change in earnings growth, has significant explanatory power for future excess returns. These excess returns are robust to a wide range of previously documented anomalies and a battery of risk controls. The future return predictability appears to be consistent with investors assuming a seasonal random walk model for quarterly earnings and missing predictable implications of earnings acceleration for future earnings growth. Finally, the excess returns from the basic earnings acceleration strategy can be enhanced further by focusing on profit firms, low earnings volatility firms and on specific patterns of earnings acceleration.

Joshua Gans of University of Toronto reviews “Making Wise Decisions in a Smart World: Responsible Leadership in an Era of Artificial Intelligence” by Peter Verhezen. The Econlit abstract of this book begins: “Considers the importance of sound decision-making in the uncertain and turbulent era of artificial intelligence (AI), discussing how organizations can create sustainable value and thrive without harming others.”

George H. Sorter, Martin S. Gans, Opportunities and Implications of the Report on Objectives of Financial Statements, Journal of Accounting Research, Vol. 12, Studies on Financial Accounting Objectives: 1974 (1974), pp. 1-12

Most approaches to entrepreneurship assume that entrepreneurial control over their inventions is critical for success and, in turn, for incentives. Such control is usually supported by regulations that protect intellectual property including patents, copyrights, and trade secrets. Each give the entrepreneurs control over who can appropriate value from their activities. However, we note that another, distinct path exists for appropriation by entrepreneurs' execution. Execution forgoes the formal protection from control instead of a more rapid approach to market in the pursuit of capabilities that will allow entrepreneurs to compete with others in the future rather than block their activities per se. We characterize the conditions under which one path is preferred to another and present evidence from university startups delineating the tradeoffs at the heart of our theoretical approach.