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Investors' Evaluations of Strategic Prior-Period Benchmark Disclosures in Earnings Announcements

Susan D. Krische
The Accounting Review 2005 80(1), 243-268
Schrand and Walther's (2000) archival evidence suggests that managers strategically disclose prior-period benchmarks in current earnings announcements, which, in turn, influences investors' judgments. Using a controlled experimental setting, I present evidence confirming that a transparent description of a transitory prior-period gain or loss affects how investors apply prior-period earnings when evaluating currentperiod earnings. I also provide evidence that this effect is likely to be unintentional on the part of investors, resulting from limitations in their memory for the prior-period event. Overall, the experimental results suggest that a quantitative description of the transitory prior-period gain or loss in a current earnings announcement helps investors to evaluate company performance. The results also highlight the need for consistency in reporting non-GAAP financial performance measures.

The Importance of Circulating and Presenting Manuscripts: Evidence from the Accounting Literature

Lawrence D. Brown
The Accounting Review 2005 80(1), 55-83
Editors exhort authors to circulate and present their working papers to colleagues before submitting them to journals (Zimmerman 1989; Green et al. 2002). Authors heeding such advice are said to increase the likelihood of getting their work published and making their research, once published, more influential (Zimmerman 1989). While evidence regarding these matters is of keen importance to authors, editors, and administrators, no research exists showing that circulating and presenting manuscripts increases their probability of being accepted in accounting journals or, when published, their influence on stimulating other research. I present such evidence by perusing acknowledgments in premier accounting journals. I examine the relation between circulating and presenting manuscripts and the probability of acceptance by relating acknowledgments of 305 papers submitted to The Accounting Review during June 2002–May 2003 to the editor's reject versus revise and resubmit decision. I examine the relation between circulating and presenting manuscripts and an article's influence by relating the acknowledgments in 256 articles published in The Accounting Review, Journal of Accounting Research, and Journal of Accounting and Economics to citations to these articles. My two analyses of acknowledgments to institutions, conferences, and individuals yield similar results. I find that papers presented at more workshops are more likely to be invited back to The Accounting Review, and that papers published in The Accounting Review, Journal of Accounting and Economics, or Journal of Accounting Research generate more citations if they were presented previously at more workshops.

Corporate Tax-Planning Effectiveness: The Role of Compensation-Based Incentives

John D. Phillips
The Accounting Review 2003 78(3), 847-874
This study investigates whether compensating chief executive officers and business-unit managers using after-tax accounting-based performance measures leads to lower effective tax rates, the empirical surrogate used for tax-planning effectiveness. Utilizing proprietary compensation data obtained in a survey of corporate executives, the relation between effective tax rates and after-tax performance measures is modeled and estimated using a two-step approach that corrects for the endogeneity bias associated with firms' decisions to compensate managers on a pre- versus after-tax basis. The results are consistent with the hypothesis that compensating business-unit managers, but not chief executive officers, on an after-tax basis leads to lower effective tax rates.

Risk Preferences in Participative Budgeting.

D. C. Kim
The Accounting Review 1992 67(2), 303-318
Examines participative budgeting in the context of the psychology of risk. Theoretical background on risk preferences; Empirical evidence of domain-specific risk preferences; Study design; Dispositional risk attitude measurement; Preference ratings of risk-averse versus risk-taking groups; Limitations of the study.