This paper examines the nature of the equilibrium solution to the duopoly prob-lem under various "incomplete " information structures and the incentives to produce and disclose information. Attention is focused on the duopolists ' cost functions. The results indicate that disclosure of such information is generally beneficial to the duopolists. I.

The specification of the market expectation of accounting numbers is a common feature of many empirical studies in accounting and finance. Givoly and Lakonishok (1979) found that financial analysts' forecasts have information content. This study evaluates the quality of analysts' forecasts as surrogates for the market expectation of earnings and compares it with that of prediction models commonly used in research. Results indicate that prediction errors of analysts are more closely associated with security price movements, suggesting that analysts' forecasts provide a better surrogate for market expectations than forecasts generated by time-series models. The study also identifies factors that might contribute to the performance of the financial analysts'forecasts. The broadness of the information set employed by analysts and, to a lesser extent, their reliance on information released after the end of the fiscal year appear to be important contributors to their performance.

In 1978, the Securities and Exchange Commission issued its final requirements concerning the disclosure requirements of companies that change their auditors. Along with a filing requirement for an auditor change, companies were also required to enumerate and describe disagreements they may have had with their CPAs on accounting and auditing issues in the 18 months prior to the change. To provide evidence on the existence and degree of market impact of these disclosure requirements, the behavior of stock prices of a sample of companies that switched auditors and a matched pair of control companies that did not were analyzed. Results of the study appear to be inconsistent with the SEC requirement for companies to enumerate and describe disagreements with their auditors. For the general event of auditor changes, there seems to be negative market reaction around the time of the switch; however, there is some difficulty in interpreting the motivation for this reaction.

This study documents management's reactions to an inventory tax allowance that is based on inventory levels at the beginning of the year. Such an allowance was permitted by the tax authorities in Canada and Israel. The study develops a theoretical model which shows that a rational management should increase the firm's inventory levels on the balance sheet date beyond what the normal ordering policy would indicate. Moreover, tax authorities, in failing to anticipate this behavior, may, ceteris paribus , overcompensate firms for inflation. Empirical evidence shows that firms do, indeed, alter their ordering policies so that they will hold larger inventories on the balance sheet date. The study also shows that the tax authorities overcompensated firms in Israel, but did not overcompensate firms in Canada. Résumé. Cette étude documente les réactions du management à un dégrèvement fiscal afférent aux stocks basé sur les niveaux des stocks au début de l'année. Un tel dégrèvement était permis par les autorités fiscales au Canada et en Israël. L'étude développe un modèle théorique qui montre qu'un management rationnel devrait augmenter les niveaux des stocks de la firme à la date du bilan, au‐delà de ce que la politique normale d'approvisionnement pourrait indiquer. D'ailleurs, les autorités fiscales qui n'anticipent pas ce comportement peuvent ceteris paribus, sur‐idemniser les firmes pour l'inflation. L'évidence empirique montre en effet, que les firmes modifient leurs politiques d'approvisionnement de façon à avoir de plus gros stocks à la date du bilan. L'étude montre aussi que les autorités fiscales ont sur‐indemnisé les firmes en Israël, mais ne les ont pas sur‐indemnisées au Canada.

The article presents reply from authors issues related to alternative interim reporting techniques within a dynamic framework. Professor William S. Hop wood and Paul Newbold criticize the single-period setting and the single-signal-reporting system. In their analysis, they show by counter-examples that when one adopts a multiperiod world, both the integral and the combination method may result in an infinite variance when the reporting objective is to predict the current period earnings. The intuition behind is that when managers have perfect foresight and the reports always contain half of the annual totals, investors are unable to allocate correctly the annual total among the interim periods, if one assumes that the process generating earnings is seasonal. Moreover, since investors have access to other information for breaking down the annual totals, the information set in the beginning of the period may not be as method-dependent. For example, many industry sales and earnings data are reported for interim periods by trade associations. Users can thus derive prior distributions and form expectations regarding interim results from a combination of industry and firm data. Thus, the prior distributions may not be so different, even if different reporting methods had been used in prior periods.

The issue of interim reports is once again under consideration by the accounting profession. In its Discussion Memorandum, the FASB describes three major methods for interim reporting--the integral, the discrete, and the combination. The Board refers to the combination method as the one which combines the advantages of both the integral and discrete methods. Specifying three different objectives of interim reporting and using differing assumptions about the forecasting ability of management, this study examines the conditions under which the Board's assumption might hold true. In doing so, however, it is also shown that there exist conditions wherein one of the other methods would always be preferred. The paper concludes with a suggestion which, if implemented, could result in the combination method being preferred.