Accounting measurement, price-earnings ratio, and the information content of security prices
Article Abstract:
Financial research offers evidence that stock prices lead accounting earnings A study was conducted to demonstrate that financial statements contain information that can be summarized in a single measure that forecasts earnings and removes transitory components of current earnings. The information used in the study was taken from financial statements published for the fiscal years 1973-1983. The financial statements were obtained from 1984 Compustat annual report files and the 1984 Compustat research file. Research results indicate that financial statements provide current earnings figures that are identified in the income statement and future earnings that are identified by the financial statement analysis in the study. The evidence further indicates that financial statements contain information that removes transitory components of current earnings. A discussion of accounting measurement, price-earnings ratio, and information content by David F. Larcker follows.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1989
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Incentives for accruing costs and efficiency in regulated monopolies subject to ROE constraint
Article Abstract:
The incentive packages offered electric utility company top level managers are examined with a consideration of the special problems created by the cost-plus pricing system mandated by Congress. Examination findings indicate that stockholders could reduce their residual costs if they motivate managers to operate as efficiently as possible within the allowed rates of return and pass costs on to consumers. The findings also show that: executives' compensation is determined mostly by the size of the electric utility; CEOs' compensation is increased by accruing relatively larger operating slack; and managers' efforts appear to be unrelated to compensation. A discussion by Thomas L. Stober is included.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1988
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