Differential Informativeness of Accrual Measures to Analysts’ Forecast Accuracy

This paper evaluates whether analysts incorporate formal measures of earnings quality into their earnings forecasts. It examines whether the accrual ratio and abnormal accruals, measured with the Modified Jones (1991) Model of discretionary accruals, differentially inform analysts’ earnings forecasts. It uses the accuracy of analysts’ forecast as a context in which to evaluate how well analysts incorporate effects of the information contained in accrual ratio and abnormal accruals. The results indicate that the accrual ratio is negatively related to the absolute value of analysts’ forecast errors while the Modified Jones (1991) Model of discretionary accruals have virtually no economic effect on analysts’ forecast error. The insignificant effect of discretionary accruals on analysts’ forecast may be attributed to analysts having already incorporated the information therein in their earnings forecasts, effect of the accrual anomaly having been largely arbitraged away by market participants or both. This paper contributes to the research on analysts’ earnings forecast and earnings quality and helps bridge the gap between practice and theory by demonstrating the differential impact of discretionary accruals (favored by academics) and the accrual ratio (favored by analysts) on analysts’ forecast accuracy. This study informs researchers and policy makers interested in better understanding how analysts affects the financial markets including how they may have learned from previously documented market anomalies such as the accrual anomaly. This is important as ultimately, efficient economy-wide capital allocation decisions are based partly on outputs of analysts’ forecasting processes

The Joint Effect Of Task Characteristics And Organizational Context On Job Performance: A Test Using SEM

Prior research document significant relationships between task characteristics and employee affective outcomes. However, there have been difficulties with implementing the findings of this task characteristics research in real life due to the absence of organizational context variables in these studies. The argument has been made that effective job design should emphasize task design (task characteristics) that is in congruence with surrounding organizational context and subsystems. The current study proposes an integrated task context model and then tests a subset of the model using organizational inflexibility and perceived environmental uncertainty to proxy for organizational context. The results of structural equation modeling confirm the existence of a joint effect of task characteristics and perceived environmental uncertainty on job performance among public accountants

A Multidisciplinary Approach To Risk Management For Accounting Firms

This paper develops an integrated risk management decision framework that provides insights into the many factors that are involved in controlling and managing risk for accounting firms.  Borrowing from the areas of insurance economics, crime and punishment, accounting, and organization theory, factors are identified that affect the demand for risk reduction.  The interaction and application of three different components of risk reduction (market insurance, self-insurance, and self-protection) within the context of risk reduction decision-making are examined