Investors' evaluations of strategic prior-period benchmark disclosures in earnings announcements

• 成果类型: Article
• 署名作者: Krische, SD
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2005.80.1.243
• 发表日期: 2005
• 页码: 243-268
• 关键词: Information disclosure; analysts; DECISION; confidence; judgments; reality

摘要

Schrand and Walther's (2000) archival evidence suggests that managers strategically disclose prior-period benchmarks in current earnings announcements, which, in turn, influences investors' judgments. Using a controlled experimental setting, I present evidence confirming that a transparent description of a transitory prior-period gain or loss affects how investors apply prior-period earnings when evaluating current-period earnings. I also provide evidence that this effect is likely to be unintentional on the part of investors, resulting from limitations in their memory for the prior-period event. Overall, the experimental results suggest that a quantitative description of the transitory prior-period gain or loss in a current earnings announcement helps investors to evaluate company performance. The results also highlight the need for consistency in reporting non-GAAP financial performance measures.