Miller (1977) hypothesizes that differences of opinion among investors about stock value result in overvaluation so long as some investors are short-sales constrained. Prior evidence on the role of differences of opinion for stock prices has not yielded convincing evidence. We test the Miller...

We argue and show that aggregation of accrual components (changes in inventories, changes in accounts payable, changes in accounts receivable and depreciation expense) into total accruals results in a loss of mispricing-related information in individual accrual components. This motivates us to...

Economic performance (economic profits, economic income, or underlying operating performance) of a firm is not observable. Market participants use accounting earnings and other proxies to measure the otherwise unobservable economic performance. Ball and Brown (1968) show that accounting earnings...

When revenues are higher or lower than expected, expenses are normally also higher or lower than expected, but by a smaller amount. We hypothesize that when revenue and expense surprises follow this normal revenue-cost structure (i.e., are quot;in-syncquot;), the resultant earnings surprises are...

We show a significantly negative association between changes in financial leverage and contemporaneous risk-adjusted stock returns. The results are consistent with the hypothesis that changes in financial leverage are affected by and, therefore, signal changes in underlying operating...

We study a sample of 178 firms that changed from a one-share one-vote into a dual-class common stock structure during 1979-1998. We find that dual-class recapitalizations are shareholder value enhancing corporate initiatives. Using accounting data, Lehn, Netter and Poulsen (1990) provide...

We show that firms reporting sustained increases in both earnings and revenues have (1) higher quality earnings and (2) larger earnings response coefficients (ERCs) in comparison to firms reporting sustained increases in earnings alone. With respect to earnings quality, firms with...

Although the price-to-earnings ratio and, its inverse, the earnings-to-price ratio (E/P) are frequently used by academics and practitioners, very little is known about their association with macroeconomic variables over the long term. In this paper, we examine the annual E/P ratio at the economy...