Does LIFO inventory accounting improve the income statement at the expense of the balance sheet?

Article Abstract:

Several last in, first out (LIFO) firms were studied to compare the ability of LIFO income statements and balance sheets and their 'as if' non-LIFO counterparts in showing the cross-sectional distribution of equity values for the sample firms. An analysis of LIFO reserve footnote disclosures was also made to supplement LIFO-based income statements and balance sheets. Results showed that LIFO-based income statements were better able to explain more of the differences in equity values as compared with their 'as if' non-LIFO counterparts, particularly during high inflation years. Meanwhile, there was no loss of information when the 'as if' non-LIFO and incremental LIFO components were aggregated as cost of goods sold in the LIFO income statement. Compared with their LIFO counterparts, 'as if' non-LIFO balance sheets explain a smaller proportion of the variation in equity values.

Accounting and auditing, Financial statements, Inventories, Inventory accounting

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Investor reactions to financial analysts' research reports

Article Abstract:

A study is conducted to determine whether the response of investors to information contained in the financial analysts' research reports is affected by the characteristics of the analysts and of the report. The results show that investors' reactions to analysts' reports are influenced by both the analysts' incentives and their conclusions about the stock. It is found that investors consider a favorable research report to agree with with their expectations that analysts are inclined to release positive reports. Findings also indicate that investors believe that analysts whose firms offer both investment-banking and research-analysis services have a greater tendency to issue more favorable reports than analysts whose firms offer only research analysis service.

Research, Beliefs, opinions and attitudes, Investors, Business reports, Investment analysis, Securities analysis

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The joint effect of management's prior forecast accuracy and the form of its financial forecasts on investor judgment

Article Abstract:

The functional relationship between investor reactions to management earnings forecasts and both the form of the forecast and prior accuracy is examined. Previous studies argue that forecast value relevance is a function of form, timing and credibility; a new hypothesis extends this framework by suggesting that prior forecast accuracy is a particularly crucial aspect of credibility and interacts closely with form. Forecast form effects are found to increase as prior accuracy increases.

United States, Forecasts, trends, outlooks, Science & research, Business forecasting

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