Introduction to Accounting Research (ACCT7300)

Spring 2008

Research Question Inventory

1. Is the information in analyst forecast revisions of long term earnings incremental relative to current quarter unexpected earnings?

2. What are the factors that lead to forecast revisions in the “quiet period” prior to an earnings announcement? [Examples might include analyst characteristics, firm characteristics, market activity.]

3. See notes on Ball & Brown (1968 JAR) – Questions for further research

4. In relation to the Antle, et al. paper about the relations between audit fees, non-audit fees and abnormal accruals (2006 RQFA):

(a) There was a suggestion that to the extent possible non-audit fees be broken out between tax and consulting fees. The basic idea is that we could expect only the consulting fees (e.g. implementing a JIT system, or an ERP system) to have a productive effect (i.e. reduce abnormal accruals). We would not expect the tax services to have any productive effect on abnormal accruals.

(b) Another suggestion is that we may be able to measure the relation between earnings management and changes in audit fees by running regression with setting changes in audit fees as dependent variable. The basic intuition in this idea is that before firms do manage earnings, they tend to increase their audit fees. The summarized statement is "Do changes in audit fee lead to earnings management?"

5. In relation to the Bernard and Thomas paper (1990 JAE):

(a) Has post-earnings announcement drift has dissipated over time? It would be interesting to see whether the relation between future returns and the one-quarter lagged earnings change persists while the four-quarter lagged earnings change dissipates. If so, then rather than anchoring too heavily on an SRW model, the market may simply underreact to earnings news in more recent years. If so, we need a theory to explain market underreaction.

(b) Is the negative relation between returns four quarters hence and the current quarter earnings change simply another reflection of the accruals anomaly? If so, we should expect to see a stronger relation in cases where it appears that firms have used flexibility in accruals to manage their earnings.

6. In relation to the Bonner et al. (2003) paper:

(a) If investors do not fully incorporate the predictability of analyst accuracy, does the prediction model predict abnormal returns?

(b) Why does the analyst's own prior forecast serve as the best proxy for the market's earnings expectations?

(c) Is sophistication correlated with the richness of the information environment? If so, are timely forecasts more useful in poor information environment (low sophistication) obsertations. Need a proxy for usefulness – i.e., uncertainty resolution – then we could interact this with sophistication and forecast revision in explaining CAR.

7. In relation to the Maines and Hand (1996) paper:

(a) In a market setting, is PEAD more pronounced when the autoregressive component is large? Does the market overreact to prior quarter’s earnings change when the firm’s earnings series is closer to a SRW?

8. In relation to Easton and Zmijewski (1989):

(a) Can we find a consistent statistically positive relation between ERCs and risk, when we measure risk using in a three-factor Fama-French framework? Does adding a fourth factor for accounting accruals (to proxy for information risk) strengthen the relation between ERCs and risk?

9. In relation to Easton, Harris and Ohlson (1992):

(a) Controlling for the price-deflated earnings level, is unexpected earnings, measured in relation to analysts' forecasts, significantly related to returns in long-window earnings-returns regressions?

(b) Why is "a dollar of earnings … associated with more than a dollar of change in value for long return periods"? Is this result due to firms with greater earnings having larger reserves and more conservative accounting?

10.