Knowledge that Transforms

Richard A. Lambert, David F. Larcker, An Analysis of the use of Accounting and Market Measures of Performance in Executive Compensation Contracts, Journal of Accounting Research, Vol. 25, Studies on Stewardship Uses of Accounting Information (1987), pp. 85-125

Auditing, Audit delay, Timeliness

Pension plan termination, Financial slack, Overfunded pension funds

Decision making, Centralized decision making, Delegated decision making, Value of communication

Voluntary Disclosure, Management forecasts, Intraindustry effect, Information dissemination

Cost allocation, Noncontrollable cost allocation, Collusion, Performance evaluation

Auditing, Sampling, Qualified opinion

Stock market Disciplining, Rational expectations model, Managerial decision making

This paper provides a framework and some empirical evidence to evaluate the seriousness of problems in inference that arise in stockreturn-based studies when the data are cross-sectionally dependent. The study is motivated on the grounds that statistical procedures designed to address such problems are often infeasible, and even when they can be implemented they sometimes introduce other more serious difficulties. Thus, researchers have frequently adopted an approach that ignores the cross-sectional dependence (e.g., ordinary least squares [OLS]). The objective of this paper is to help identify the contexts in which ignoring the dependence would lead to serious misstatement of significance levels. Cross-sectional dependence in stock returns data is likely to exist when at least some of the returns are sampled from common time periods. This would be the case in all studies of the reaction of stock prices to a

Robert Jennings, Unsystematic Security Price Movements, Management Earnings Forecasts, and Revisions in Consensus Analyst Earnings Forecasts, Journal of Accounting Research, Vol. 25, No. 1 (Spring, 1987), pp. 90-110