Three essays in accounting

Sahin, Ali (2016). Three essays in accounting. (Unpublished Doctoral thesis, City, University of London)

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This thesis consists of three essays focusing on three different issues. The first revisits the question whether analysts anticipate the persistence of accruals in future earnings. We find that if total accruals are used (covering also non-current operating and financing accruals, unlike previous research that uses mainly working capital accruals), analysts’ forecast errors are uncorrelated with accruals. Our findings overall do not warrant the lack of sophistication argument. The second chapter examines whether multi segmentation affects the probability of meeting analysts’ forecasts, and whether the ‘diversification’ discount that multi segment firms seem to suffer from is alleviated/exacerbated when multi segment firms meet/miss analysts’ forecasts. We find for multi segment firms, no (less) earnings/forecast management to meet forecasts, more complex information environment, lower probability of meeting analysts’ forecasts, and weaker investor reaction to meeting/missing forecasts, while significant discount if they meet forecasts by engaging in earnings/forecast management. The third chapter examines whether unconditional accounting conservatism provides a rational explanation to book to price (B/P) effect in stock returns (higher B/P yielding higher returns) coined as anomaly. We test an argument following Penman and Reggiani (2013) linking conservative accounting to future returns and subsequent earnings growth, and we find strong support to the conservative accounting explanation to B/P effect.

Item Type: Thesis (Doctoral)
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Divisions: Cass Business School > Faculty of Finance

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