Numerous accounting studies claim that investors fail to rationally price accrual-related information and that investors are functionally fixated. This study documents the importance of performing robustness tests when testing economic or behavioral explanations for apparent accounting-related...

<heading id="h1" level="1" implicit="yes" format="display">ABSTRACT</heading>The test developed in Mishkin [1983] (hereafter, MT) is widely used to test the rational pricing of accounting numbers. However, contrary to the perception in the accounting literature, the exclusion of variables from the MT's forecasting and pricing equations leads to an omitted...

We study a relatively recent change in voluntary disclosure practices by management, namely, the issuance of cash flow forecasts. We predict and find that management issues cash flow forecasts to signal good news in cash flow, to meet investor demand for cash flow information, and to precommit...