No abstract

Several studies have characterized the relation between discretionary accruals and earnings before-taxes to test for the existence of earnings smoothing behaviors. In this paper, we argue that the characteristic response of accruals to earnings is not linear, as the literature has shown. Instead, it is likely to be driven by non-linear patterns since both the incentives to manipulate earnings and the practical way to do so depend, in part, on the relative size of earnings. Using a sample of 9,442 US banks in the period 1999-2008, this paper shows that bank managers tend to use provisions as a smoothing devise when earnings are substantial ("cookie-jar" strategies), engage in earningsdecreasing strategies when losses are relatively large ("big-bath" accounting) and, most of the time, use provisions as an earnings-increasing tool. Hence, it is shown that nonlinear specifications are more informative with regard to the different strategies employed to manipulate earnings. Abstract Several studies have characterized the relation between discretionary accruals and earnings before-taxes to test for the existence of earnings smoothing behaviors. In this paper, we argue that the characteristic response of accruals to earnings is not linear, as the literature has shown. Instead, it is likely to be driven by non-linear patterns since both the incentives to manipulate earnings and the practical way to do so depend, in part, on the relative size of earnings. Using a sample of 9,442 US banks in the period 1999-2008, this paper shows that bank managers tend to use provisions as a smoothing devise when earnings are substantial ("cookie-jar" strategies), engage in earningsdecreasing strategies when losses are relatively large ("big-bath" accounting) and, most of the time, use provisions as an earnings-increasing tool. Hence, it is shown that nonlinear specifications are more informative with regard to the different strategies employed to manipulate earnings. Marina Balboa

No abstract

"The financial literature has shown that both earnings forecasts and investment recommendations are optimistically biased. However, while the bias in earnings forecasts has decreased over time and even some recent studies show that they are no longer optimistic, in the case of investment recommendations this bias still remains relatively constant over time. Therefore, it seems that recommendations are less credible to investors than earnings forecasts. The vast majority of recommendation studies have been carried out at the country level. In this paper, we use an international context to study whether profitable investment strategies exist when adjusting the recommendation bias of each analysed country. The adjustment we propose to correct this bias takes into account the differences across countries, and also varies in time to correct for the changes in bias over time within countries. Our empirical results show that there are in fact significant differences in the level of bias among countries, with the US and the UK being the countries with the highest bias. Second, the adjusted consensus portfolios are more orthogonal to typical investment styles (size, book-to-market and attention) and we find that investors could implement a higher number of profitable investment strategies using this adjusted measure. In this line, the results show that the countries with the lowest bias obtain the highest risk adjusted abnormal returns. Third, our work entails a practical implication, as it shows the value embedded in a simple necessary adjustment in the global asset management context. This is an important result showing that profitable investment strategies exist when considering a global portfolio based on adjusted recommendations." Copyright (c) 2007 The Authors Journal compilation (c) 2007 Blackwell Publishing Ltd.

A B S T R A C TThe aim of this paper is to identify the key factors that lie behind venture capital/private equity fundraising in countries where there is scarce and asymmetric information about final returns. The main contribution of this paper is to explain fundraising by means of variables directly related to the venture capital process rather than by macroeconomic ones. We use panel data techniques on data from 16 European countries during the nineties. In the light of the long period required for investing committed capital and the illiquid nature of investments until the fund is divested, the focus is placed on the investing capabilities of fund managers. We find that the amounts invested in the previous year have a positive and significant impact on fundraising. In this sense, the market would be regarding the ability of fund managers to invest the total amounts investors have previously committed.