Introduction to Accounting Research (ACCT7300)

Spring 2008

Instructor: Phil Shane (KOBL 445, 303-492-0423 or 303-915-9069)

Class meets Mondays 3pm-5:30pm in KOBL S129

Office hours: 1-2pm and 3:30-5:30pm Wednesdays or by appointment.

Course WebPages: http://leeds-faculty.colorado.edu/shanep/teaching/docsem/spring2008/

 

Course Objectives:

(1)   Increase proficiency and clarity in your written and oral communication.

(2)   Increase proficiency in effectively reading and critiquing research papers.

(3)   Gain perspective on philosophy of science and modern positive accounting research.

(4)   Learn about fundamental cornerstones and major ideas underlying accounting research.

(5)   Gain appreciation of research design issues and various accounting research methods.

(6)   Develop interest in current research questions and propose your own research.

 

Readings:

·           Watts, R., and J. Zimmerman. 1986. Positive Accounting Theory. Prentice Hall.

·           See the course schedule for specific reading assignments.

 

Assignments (written work is all double-spaced 12 point font):

A.     (10%)  Identify three research questions related to each reading assignment through Week 10.  Bring these research questions to class and we will accumulate a list together.

B.     (20%)  Lead the discussion around a paper of your choice (see weeks 9 and 10 below) and one other research paper listed on the course schedule.

C.     (20%)  Prepare a 3-to-5 page critique of the paper from the course reading list that you picked for your discussion leader assignment in (B) above.  Explain what we learn from the paper and what aspects of the papers’ most important research questions remain unanswered.  Your critique also should include three threats to the validity of the inferences the authors draw from their research evidence.  Alternatively, if you think the study is particularly well-designed, you can comment on strengths of the research design that mitigate factors that might otherwise threaten the validity of the inferences.

D.     (50%)  Write a 15-to-20 page paper that:  (1) selects a research question, either on your own or from among those identified in class discussions; (2) carefully articulates why the answer to this question is important to the academic accounting discipline; (3) discusses the findings of the most important published research (and working papers if you like) related to this research question; (4) with reference to deficiencies or gaps in the prior research, discusses aspects of the question that remain unanswered; and (5) suggests an approach you might take in conducting a study to alleviate one or more of those deficiencies or fill one or more of the gaps.  Regarding item (3), your paper should include a detailed summary/discussion of three papers related to your research question.  I will gladly work with you in the identification/statement of your research question and in the selection of three papers related to that question.  We will discuss one of these three papers in class to help you get started in thinking about your project.

Introduction to Accounting Research (ACCT7300)

ACCT7300, Spring 2008

Course Schedule

 

Unless otherwise indicated, all readings below are available at Business Source Premier.

 

January 14th (week 1)  Introduction.  See course home page for syllabus, “a good empirical dissertation”, and other features.

 

January 21st (week 2)  Martin Luther King Day. 

 

January 28th (week 3):

·        WZ chapters 1 and 2.

·        Hausman, D. 1992. Why look under the hood?  in Essays on Philosophy and Economic Methodology (1992), pp. 70-73; rpt. in The Philosophy of Economics. 2nd. ed., pp. 217-21. Available online at http://philosophy.wisc.edu/hausman/papers/38.htm.

·        Mayer. T. 1993. Friedman's methodology of positive economics: a soft reading. Economic Inquiry, April 1993 v31 n2 p213(11). Click here for copy of article.

·        Fama and MacBeth Fama E., MacBeth J., Risk, Return, and Equilibrium: Empirical Tests, 1973, Journal of Political Economy, Vol. 81, Issue 3, pp. 607-636.

·        Review course notes and study questions related to all of the above.

 

February 4th (week 4):  WZ chapters 3 and 4.

o       Review course notes and study questions on WZ chapters 3 and 4.

o       Ball, R., and P. Brown. 1968. An empirical evaluation of accounting income numbers. Journal of Accounting Research 6: 159-178.

o       See course notes describing questions for further research stimulated by Ball and Brown (1968).

 

February 11th (week 5):

·        Guidelines on critiquing accounting research (see course home page).

·        Libby, R. 1981. Accounting and Human Information Processing. Prentice Hall. Chapter 1  (handed out).

·        Kinney, W. Jr. 1986. Empirical accounting research design for Ph.D. students. The Accounting Review 61: 338-350.

·        Kinney, W. Jr. 2001. Accounting scholarship: What is uniquely ours? The Accounting Review 76: 275-284.

·        Kinney, W. Jr. 2003. New accounting scholars: Does it matter what we teach them? Issues in Accounting Education 18 : 37-48.

·        Antle, R., Gordon, E., Narayanamoorthy, G., and L. Zhou. 2006. The joint determination of audit fees, non-audit fees, and abnormal accruals. Review of Quantitative Finance and Accounting 27: 235-266.

·      For further (and more fundamental) insight into endogeneity, see Bhagat, S., and R. Jeffries. The Econometrics of Corporate Governance Studies (at Professor Bhagat's website, click on "research links" and then click on the title) MIT Press.

·      Brian will lead the discussion.

·        Apply “Libby Boxes” to Ball and Brown (1968) and Antle et al. (2006).

 

February 18th (week 6):  WZ chapters 5 and 6.

o       Review course notes and study questions related to WZ chapters 5 and 6.

o       Bernard, V., and J. Thomas. 1990. Evidence that stock prices do not fully reflect the implications of current earnings for future earnings. Journal of Accounting and Economics 13: 305-340.

 

February 25th (week 7):

·        Maines, L., and J. Hand. 1996. Individuals' perceptions and misperceptions of time-series properties of earnings. The Accounting Review 71: 317-336.

·        Bonner, S., B. Walther & S.M. Young. (2003). Sophistication-related differences in investors’ models of the relative accuracy of analysts’ forecast revisions. The Accounting Review 78: 679-706.

 

March 3rd (week 8):  WZ chapters 7 and 8.

·      Review course notes and study questions related to WZ chapters 7 and 8.

·      Easton, P., and M. Zmijewski. 1989. Cross-sectional variation in the stock market response to accounting earnings announcements. Journal of Accounting and Economics 11: 117-141.

 

March 10th (week 9):  WZ chapters 9 and 10.

·        Easton, P; Harris, T; and J. Ohlson. 1992. Aggregate accounting earnings can explain most of security returns. Journal of Accounting & Economics 15: 119-143.

·      Review course notes and study questions related to WZ chapter 9.

 

March 17th (week 10):

·      Student-selected papers.

o          Bhojraj, S.; and C. Lee. 2002. Who Is My Peer? A Valuation-Based Approach to the Selection of Comparable Firms. Journal of Accounting Research 40: 407-439.

o     Greg will lead the discussion.

o          Dechow, P., Hutton, A., and R. Sloan. 2000. The relation between analysts' forecasts of long-term earnings growth and stock price performance following equity offerings. Contemporary Accounting Research 17: 1-32.

o     Brian will lead the discussion.

 

March 24th (week 11):

·        Spring break.

 

March 31st (week 12):  WZ chapter 11.

·      Student-selected papers:

·      Leone, A., Wu, J., and J. Zimmerman.  Asymmetric sensitivity of CEO cash compensation to stock returns. Journal of Accounting and Economics 42: 167-192.

o          Sanghyuk will lead the discussion.

·      McAnally, M.L., Srivastava, A., and C. Weaver. Executive stock options, missed earnings targets and earnings management. The Accounting Review 83: 185-216. 

o          Kristin will lead the discussion of a paper to be selected.

·      Review course notes and study questions related to WZ chapter 11.

 

April 7th (week 13):  WZ chapter 12.

o          Liu, J., and J. Thomas. 2000. Stock returns and accounting earnings. Journal of Accounting Research 38: 71-101.

o          Greg will lead the discussion.

o          Review course notes and study questions related to WZ chapter 12.

 

April 14th (week 14):

·      Trueman, B. 1990. On the incentives for security analysts to revise their earnings forecasts, Contemporary Accounting Research, 7, 203-222.

o          Kristin will lead the discussion.

·      Raedy, J., Shane, P., & Yang, Y. 2006. Horizon-dependent underreaction in financial analysts' earnings forecasts. Contemporary Accounting Research 23: 291-322.

o          Sanghyuk will lead the discussion.

 

April 21st (week 15): WZ chapters 13 and 14.

·      Review course notes and study questions on WZ chs 13 and 14.

·      Kraft, A., Leone, A., and C. Wasley. 2007. Regression-based tests of the market mispricing of accounting numbers: The Mishkin test and ordinary least squares. The Journal of Accounting Research 45: 1081-1114.

 

April 28th (week 16): WZ chapter 15.

·      Review course notes and study questions on WZ ch 15.

·      Shane, P., and P. Brous. 2001. Investor and (Value Line) analyst underreaction to information about future earnings: The corrective role of non-earnings surprise information. Journal of Accounting Research 39: 387-404.

·      Jacob, J., and B. Jorgensen. 2007. Earnings management and accounting income aggregation. Journal of Accounting and Economics 43: 369-390.

 

Other papers:

·        Durtschi, C., and P. Easton. 2005. Earnings management? The shapes of the frequency distributions of earnings metrics are not evidence ipso facto. Journal of Accounting Research 43: 557-592.

·        Hanlon, M. 2005. The persistence and pricing of earnings, accruals and cash flows when firms have large book-tax differences. The Accounting Review 80: 137-166.