Do MD&A Disclosures Help Users Interpret Disproportionate Inventory Increases?

• 成果类型: Article
• 署名作者: Sun, Yan
• 署名单位: Saint Louis University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2010.85.4.1411
• 发表日期: 2010
• 页码: 1411-1440
• 关键词: earnings management; CORPORATE DISCLOSURE; Fundamental analysis; INFORMATION; accruals; cost

摘要

This study investigates whether MD&A disclosures have predictive ability for future firm performance in cases of disproportionate inventory increases. Using a sample of 568 manufacturing firms with disproportionate inventory increases, I find that the favorability of explanations for inventory changes in MD&A is positively associated with a firm's profitability and sales growth in the subsequent three years. I also find that future profitability and sales growth of firms that do not explain disproportionate inventory increases in MD&A fall between those of firms with favorable explanations and firms with unfavorable explanations. These results suggest that the existence and the favorability of MD&A inventory disclosures help users interpret disproportionate inventory increases and predict future firm performance.