We find that financial statement comparability enhances the ability of current period returns to reflect future earnings, as measured by the future earnings response coefficient (FERC). This suggests that comparability improves the informativeness of stock prices and allows investors to better anticipate future firm performance. In addition, using both the FERC and stock price synchronicity tests, we find that comparability increases the amount of firm-specific information (rather than market/industry-level information) reflected in stock prices. Analysts play an important role in improving stock price informativeness by producing more firm-specific information when comparability is high. These findings suggest that comparability lowers the costs of gathering and processing firm-specific information.Comparabilité des états financiers et information sur les résultats futurs livrée par le cours des actions RÉSUMÉ Les auteurs constatent que la comparabilité des états financiers accroît l'aptitude des rendements de l'exercice courant à refléter les résultats futurs, mesurée au moyen du coefficient de réaction des résultats futurs (CRRF). Ce constat donne à penser que la comparabilité améliore la valeur informative du cours des actions et permet aux investisseurs de mieux anticiper la performance future de l'entreprise. De plus, en utilisant à la fois le CRRF et les tests de synchronicité du cours des actions, les auteurs observent que la comparabilité augmente le volume d'information propre à l'entreprise (plutôt que le volume d'information relative au marché ou au secteur * Accepted by Michael Welker. We appreciate helpful comments from Michael Welker, two anonymous reviewers, Ahrum d'activité) livré par le cours des actions. Les analystes jouent un rôle important dans l'amélioration de la valeur informative du cours des actions en produisant davantage d'information propre à l'entreprise lorsque la comparabilité est élevée. Ces observations permettent de croire que la comparabilité diminue les coûts associés à la collecte et au traitement de l'information propre à l'entreprise.

Given the recent emphasis on effective tax rates by policy makers and accounting researchers, this study investigates the relation between firm size and corporate tax burdens on a yearly and an industry basis. The analysis is conducted using five effective tax measures employed in previous studies in order to determine the degree to which inferences between size and tax burden are robust across these different effective tax measures. The results indicate that the relation is fairly robust across measures and, in instances in which the relation is not upheld by our analysis, sample composition explains differences in the observed relation between firm size and corporate tax burden.

Abstract. The role of accounting information in investment decision making and capital markets has been investigated by exploring fundamental connections between accounting ntimbers and market-based phenomena of interest. Studies of bond rating predictions have described how bond raters make their judgments as a function of accounting and other data. This study expands our knowledge of these fundamental connections by investigating whether bond ratings have a direct impact on bond yields and how accounting information impacts the bond yields-directly, or indirectly through the bond ratings. A simultaneous equation system is constructed using firm-specific financial information, bond ratings by two major rating agencies, and initial offering yields. The sample used in this study consists of 189 new issue industrial bonds rated by both Standard & Poor's and Moody's that were issued from 1981 through 1983. Tests of altemative structural model configurations provide evidence regarding the interrelations between bond ratings, financial information, and bond yields. The improvements in the statistical methodology lead to a better understanding and assessment of the relative roles of bond ratings and financial information in setting bond prices. The use of simultaneous equation modeling allows the interrelations among yields, ratings, and financial information to be assessed and allows the direct and indirect effect of financial information on yields to be estimated. This results in the ability to conclude that financial itiformation affects bond ratings, that bond ratings directly affect bond yields, that financial information also directly affects bond yields, and that financial information indirecdy affects bond yields through its effect on ratings. The role of accounting information in setting bond market prices is clarified using this approach. * Research support for this project was provided by the Investors in Business Education IntroductionIn a recent critical review of capital markets research in accounting, Bemard (1990) notes a shift in focus of accounting research from policy and economic consequences issues to a renewed concem with fundamental valuation. Fundamental valuation research encompasses the development of models that map accounting and other financial information into market prices. In this study, we explore the role of accounting information in setting bond market prices. Establishing fundamental connections between accounting information and bond market phenomena involves two separate concems. The first concem is how well raters' judgments can be predicted. This research question has been comprehensively answered by a number of studies with the conclusion that about two-thirds of bond ratings can be predicted using accounting and other financial information (Kaplan and Urwitz, 1979). The second concem is whether bond ratings impact security prices and how accounting information impacts security prices-directly or indirectly through bond ratings. The nature of the interrelationships between bond...

Using 18,253 firm-year observations from 1998 through 2003, we build on literature suggesting that more informative disclosures allow returns to better reflect future earnings and test whether management earnings per share forecasts and their characteristics influence the future earnings response coefficient (FERC). We find that FERCs are greater for forecasting firms and when forecasts are more frequent or precise. We suggest that more frequent and more precise forecasts assist investors in better predicting future earnings. Importantly, we find that quarterly and short-term forecasts incrementally increase the association between returns and future earnings beyond annual and long-term forecasts; thus, even short-term, quarterly forecasts allow investors to form better expectations about future earnings. This suggests a benefit of quarterly earnings forecasts possibly overlooked in recommendations from the United States Chamber of Commerce, CFA Institute,

SYNOPSIS:Studying the determinants of management forecast precision is important because a better understanding of the factors affecting management's choice of forecast precision can provide investors and other users with cues about the characteristics of the information contained in the forecasts. In addition, as regulators assess the regulation of voluntary management disclosures, they need to better understand how managers choose among forecast precision disclosure alternatives. Using 16,872 management earnings forecasts collected from 1995 through 2004, we provide strong evidence that forecast precision is negatively associated with the magnitude of the forecast surprise and that this negative association is stronger when the forecast is bad news than when it is good news. We also find that forecast precision is negatively associated with the absolute magnitude of the forecast error that proxies for the forecast uncertainty that managers face when they issue forecasts, and that the negative association is stronger when forecast errors are negative. These results are consistent with greater liability concerns related to bad news forecasts and negative forecast errors, respectively. Our study provides educators and researchers with important insights into management's choice of earnings forecast precision, which is a component of the voluntary disclosure process that is not well understood.Keywords: management forecasts; management forecast precision; management forecast surprise; management forecast error.