Analyst Underreaction to Past Information About Earnings: reporting, processing or plain old misspecification bias?

We revisit the debate concerning the interpretation given to prior year’s earnings changes in predicting future earnings as discussed by Abarbanell & Bernard (1992), Francis & Philbrick (1993) and Easterwood and Nutt (1999). We advance a new specification of this relationship which distinguishes between earnings reversion and momentum. On a large UK dataset, we find there is substantial underreaction, particularly in situations of earnings momentum, approximately six times as large as that identified by Abarbanell & Bernard. This suggests that analysts behaviour is still a candidate to explain post earnings announcement drift. We also show that our model performs well relative to a specification recently proposed by Easterwood and Nutt (1999)

Measuring consumer detriment under conditions of imperfect information

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Financial reporting quality across listed, medium-sized and small companies in the UK: a preliminary look.

The International Accounting Standards Board (IASB) and the UK Accounting Standards Board (ASB) have adopted different financial reporting rules for different classes of company. The IASB have issued IFRS for Small and Medium-sized Entities (SMEs) in addition to full International Financial Reporting Standards (IFRS); in the UK, currently companies follow IFRS (for public companies), UK GAAP (for medium-sized companies) or FRSSE (for small companies). It is difficult to evaluate the efficacy of this approach to regulation since the ASB (and IASB) are not clear as to what consequences should follow. Is the more extensive regulation for public companies expected to result in higher accounting quality than medium and small companies; or is it necessary to combat the increased opportunity and incentive for earnings management in public companies, so that there is the same accounting quality across the different groups of companies? The main objective of this study is to undertake a preliminary investigation of cash flow to earnings ratios as a measure of accounting quality in order to inform the future policy and discussion about the differential reporting framework. We find that the financial reporting behaviour of medium sized entities is significantly different from public and small companies. This suggests that accounting standards do not equalise accounting quality

Earnings quality across different reporting regimes: listed, large private, medium-sized, small and micro companies in the UK

Purpose – Since the UK Companies Act 1981, different reporting standards have developed for different classes of company to reduce the reporting burden on non-listed companies. There are now different regimes for listed, large private, medium sized, small, and micro companies. This strategy raises the issue of whether earnings quality across the different classes of company is comparable. Design/methodology/approach – The paper uses the smoothness of earnings to measure reporting quality across the different types of company from 2006-2013, based on 514,000 observations. Smoothness is an indicator of poor quality. Findings – We find that listed companies have the highest earnings quality, closely followed by small and micro companies. In contrast, large private and medium sized companies have much lower earnings quality. Overall, we find companies which switch between reporting regimes have lower earnings quality. We also find that earnings quality is not affected by the small company exemption from audit. Research limitations/implications –Companies filing abbreviated accounts are excluded since they do not file an income statement. The recent revisions to UK GAAP (FRS102 and FRS105) are not examined due to insufficient data. Practical implications – The Financial Reporting Council’s strategy of reducing the financial reporting and auditing obligations for small companies seems not to have significantly affected earnings quality. However, the FRC may need to review the reporting requirements of large private and medium sized companies and also the option of companies to switch between reporting regimes; in these settings earnings quality appears to be weaker. Originality/value – The paper studies the effect of earnings quality across the different reporting regimes in the UK. Novel and important features of the study are that (i) the sample covers a wide variety of small and micro companies which have not been analysed previously, (ii) the results are disaggregated by year, for assurance that the results are not driven by a single rogue year, and (iii) we also address the small company exemption from audit, and the flexibility of non-listed companies to switch between regimes

Community Broadband Initiatives: what makes them successful and why?

ACKNOWLEDGEMENTS The authors would like to thank the UK Engineering and Physical Sciences Research Council for their support through grant number (EP/G066051/1) Digital Economy Hub and grant number (EP/K003585/1) Communities and Cultures Network+Peer reviewedPublisher PD

Earnings management and loss reversal

This research aims to detect and measure earnings management using a newly modified version of the standard Jones model (Jones, 1991). The standard model is extended to include a measure of discretionary accruals as an additional regressor instead of using the residuals. The variable used to measure discretionary accruals is a composite variable that consists of two components, one that represents the incentive and the other represents the tool of manipulation. The model is applied to detect earnings management in loss reversal companies for listed companies in Jordan and examine the market reaction to the loss reversal. The model is also applied on loss reversal companies for listed companies in the UK and the US. In chapter three, the new model is applied on listed companies in Amman Stock Exchange (ASE). The ASE is structured into two markets: the first market and the second market. Companies are motivated to be listed or remain listed in the first market since it only lists profitable companies. Companies reporting losses more frequently are listed in the second market. Results provide evidence of earnings management for companies listed in the first market. Companies that report a loss in a previous period manipulate in the following period to report profits. As a result of loss reversal, they preserve their place in the first market and avoid dropping back to the second market. This research conducts statistical simulation tests to compare the extended Jones model with the standard model. Results show that the extended model detects earnings management better than the standard one. This new model also separates discretionary accruals from measurement error (i.e. residuals) and makes it possible to accurately measure the whole amount of manipulation. Chapter four examines the investor reaction to the manipulation taking place in the first market. Results show that the market is pricing the discretionary accruals (the manipulation) as a component of net income, although they result only from earnings management. In chapter five, the model is applied on loss reversal firms listed in the UK and in the US. Results show that the companies manipulate to reverse losses and the manipulation depends on to the presence of R&D activities and the changing level in these activities.EThOS - Electronic Theses Online ServiceGBUnited Kingdo

The role and current status of IFRS in the completion of national accounting rules: Evidence from the UK

Drawing on secondary data, we examine the transposition of the Accounting Directive 2013 into UK GAAP, with a specific focus on references to IFRS. The process involved consultation and regulatory impact assessment on the options in the Accounting Directive and proposed changes to accounting standards for non-publically accountable entities. This led to an IFRS-based approach from 2016 with three tiers: EU-adopted IFRS for group listed companies and other publicly accountable entities, an adaptation of IFRS for SMEs for non-publicly accountable entities, and a simplified version for micro-entities incorporating the requirements of the Accounting Directive. This outcome is not surprising since the UK was one of the founding members of the original IASC and a strong proponent of little GAAP. Indeed, the UK’s former Financial Reporting Standard for Smaller Entities provided a model for the IFRS for SMEs. In the past, there were few references to IFRS by the UK’s enforcement and interpretation bodies. Today, guidance is taken from IFRIC. We contribute to the literature by describing the main processes involved in implementing the Accounting Directive and the move to an IFRS-based approach in UK GAAP. Our analysis should be of interest to researchers and policy makers alike

The impact of the 2007 reforms in China on the quality of earnings

Prior to 2007, in order to encourage international investment, China operated two parallel financial reporting systems, one based on Chinese GAAP for domestic investors and the other based on IFRS for international investors. In 2007 after a series of reforms to harmonise Chinese GAAP with IFRS, this system was replaced by a single set of standards for both classes of investor. We evaluate the impact of this significant change on earnings quality for stocks quoted on the Shanghai and Shenzhen stock exchanges for the period 2003-2013. Using tests of earnings smoothing and early loss recognition, we identify three key features. Firstly, earnings quality improved consistently over the period. Secondly, prior to the reforms of 2007, IFRS earnings were of superior quality to Chinese GAAP earnings. A third and important finding is that earnings quality under Chinese GAAP after the 2007 reforms is comparable to that under pre-2007 IFRS

Australian Bat Lyssavirus: Analysis of National Bat Surveillance Data from 2010 to 2016

Australian bat lyssavirus (ABLV) was first described in 1996 and has been regularly detected in Australian bats since that time. While the virus does not cause population level impacts in bats and has minimal impacts on domestic animals, it does pose a public health risk. For this reason, bats are monitored for ABLV and a national dataset is collated and maintained by Wildlife Health Australia. The 2010–2016 dataset was analysed using logistic regression and time-series analysis to identify predictors of infection status in bats and the factors associated with human exposure to bats. In common with previous passive surveillance studies, we found that little red flying-foxes (Pteropus scapulatus) are more likely than other species to be infected with ABLV. In the four Australian mainland species of flying-fox, there are seasonal differences in infection risk that may be associated with reproductive cycles, with summer and autumn the seasons of greatest risk. The risk of human contact was also seasonal, with lower risk in winter. In line with other studies, we found that the circumstances in which the bat is encountered, such as exhibiting abnormal behaviour or being grounded, are risk factors for ABLV infection and human contact and should continue be key components of public health messaging. We also found evidence of biased recording of some types of information, which made interpretation of some findings more challenging. Strengthening of “One Health” linkages between public health and animal health services at the operational level could help overcome these biases in future, and greater harmonisation nationally would increase the value of the dataset

Importance of health assessments for conservation in noncaptive wildlife

Wildlife health assessments help identify populations at risk of starvation, disease, and decline from anthropogenic impacts on natural habitats. We conducted an overview of available health assessment studies in noncaptive vertebrates and devised a framework to strategically integrate health assessments in population monitoring. Using a systematic approach, we performed a thorough assessment of studies examining multiple health parameters of noncaptive vertebrate species from 1982 to 2020 (n = 261 studies). We quantified trends in study design and diagnostic methods across taxa with generalized linear models, bibliometric analyses, and visual representations of study location versus biodiversity hotspots. Only 35% of studies involved international or cross‐border collaboration. Countries with both high and threatened biodiversity were greatly underrepresented. Species that were not listed as threatened on the International Union for Conservation of Nature Red List represented 49% of assessed species, a trend likely associated with the regional focus of most studies. We strongly suggest following wildlife health assessment protocols when planning a study and using statistically adequate sample sizes for studies establishing reference ranges. Across all taxa blood analysis (89%), body composition assessments (81%), physical examination (72%), and fecal analyses (24% of studies) were the most common methods. A conceptual framework to improve design and standardize wildlife health assessments includes guidelines on the experimental design, data acquisition and analysis, and species conservation planning and management implications. Integrating a physiological and ecological understanding of species resilience toward threatening processes will enable informed decision making regarding the conservation of threatened species