Presents a study based on actual accounting treatment and appropriate statutory definitions of distributable equity. Explanation for managers' motivation for declaring large stock distributions and the choice of accounting method; Costly and noncostly methods of accounting.

[This paper investigates whether the accuracy of a prior earnings forecast by management serves as an indicator to analysts of the believability of a current management forecast. Regression analysis is used to examine the relationship between the usefulness of a prior forecast by management and analyst response to a current forecast, after controlling for other determinants of believability. The results suggest that management establishes a forecasting "reputation" based on prior earnings forecasts.]

[Prior studies of stock dividends and stock splits have failed to provide valid tests of earnings signaling because they incorrectly assume that "stock splits" do not restrict future cash dividends. Unlike previous studies, which also incorrectly assume that cash dividends are limited only to the amount of retained earnings, we present a study based on actual accounting treatment and appropriate statutory definitions of distributable equity. We find that more positive information is signaled if the stock distribution accounting choice reduces distributable equity.]

[This study uses experiments to examine whether individuals' earnings forecasts correctly reflect the time series properties of quarterly earnings, in particular, the positive autocorrelation in seasonal quarterly changes and the negative fourth-order moving average term documented by Brown and Rozeff (1979). We find that individuals' forecasts are sensitive to the magnitude of these time series components; however, individuals typically underweight the moving average term and under- (over-)weight the most recent seasonal quarterly change when it has a strong (weak) effect on future earnings. Individuals also place slightly more weight on quarterly changes when earnings are reported relative to those four quarters prior. These results suggest that the documented stock market under-reaction to quarterly earnings may not hold universally; rather, it may be composed of under-reactions to firms with strong autocorrelation in seasonal changes and over-reactions to firms with weak autocorrelation in seasonal changes.]

This paper investigates whether the accuracy of a prior earnings forecast by management serves as an indicator to analysts of the believability of a current management forecast. Regression analysis is used to examine the relationship between the usefulness of a prior forecast by management and analyst response to a current forecast, after controlling for other determinants of believability. The results suggest that management establishes a forecasting "reputation" based on prior earnings forecasts.