Non-linearity and specification problems in unexpected earnings response regression model
Article Abstract:
A model associating unexpected earnings with risk-adjusted security returns was systematically and empirically tested for specification errors. The unexpected earnings response regression (UERRM) model was examined to detect possible nonlinearity, residual nonnormality, heteroscedasticity, omitted variables, and systematic and random coefficient variation across firms. The specification testing used three samples of earnings forecasts, obtained from IBES, 'Value Line' and COMPUSTAT, as substitutes for expected earnings. Results showed the simple regression of unexpected earnings response to have serious specification problems. There was evidence, however, that these errors may be lessened with the application of several methods, including transformations and testing for heteroscedasticity.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1992
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Pension obligations and the bond credit market: an empirical analysis of accounting numbers
Article Abstract:
The importance and measurement of pension variables in bond-rating decisions is examined. Measures of net pension asset are included as an independent variable in the bond rating prediction model. Measures of the pension obligation, including the obligation reported by the corporation and obligations recalculated for interest discount rates, are calculated to determine which measures affect bond ratings. Results indicate that these pension measures had no significant effect on bond ratings in 1980, but pension measures using standardized interest rates had a significant effect on bond ratings in 1981 and 1982.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1987
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