Earnings Reports Research Articles

RANCANGAN OPTIMASI KONTROL PELAYANAN DI INSTALASI BEDAH SENTRAL RUMAH SAKIT UMUM DAERAH TUGUREJO SEMARANG

Installation of the Central Surgical (IBS) Regional General Hospital Tugurejo Semarang in activities using the book service registers IBS and have been using a computerized system, but the information generated has not been able to meet the information needs, especially the number of operations according to the group and specializes in one month , average per day operation, the number of emergency operations per day, percentage of daily emergency operations, and income statements every month. Therefore required a more optimal system in controlling the service in IBS. The method used in the development of information systems is the method of system development life cycle or SDLC by stage of planning, system analysis until the design stage. With the method of data retrieval through obserasi and interviews to the Head of IBS Services Unit, Administrative Officer of IBS, IBS Nurse Service Unit, and Head Units installation inpatient services. The results of this study indicate that the perpetrators of system care information systems include desk clerk IBS, IBS Nurse, IRNA Officer and Head of IBS. Actors that perform activities, registration of the official IRNA, the input data list IBS patients by nurses, input details of the action IBS by administration officials, and received a report by the head of IBS. From observations and interviews with the actors produced system IBS computer-based information systems. Based on the results of the design of information systems that processed data is the data doctors, officers, sections, rooms and wards, rates and categories of action, and disease data. While the information generated is IBS service reports, earnings reports, and reports according to the type and number of surgical specialties, with the involvement of the IRNA, doctors, nurses IBS, head of IBS, IBS Administrative Officer, Head of Service Unit and the Director. Key words: information systems, installation of central surgical

Has the Regulation of Pro Forma Reporting in the U.S. Changed Investors’ Perceptions of Pro Forma Earnings Disclosures?

We explore whether investors’ perceptions of pro forma earnings numbers have changed following the regulation of pro forma reporting imposed by the Sarbanes-Oxley Act of 2002 (SOX). First, we find that investors appear to pay more attention to pro forma earnings disclosures in the post-SOX period, consistent with the notion that they perceive that regulation generally renders these disclosures more credible. Second, the results indicate that investors discount aggressive pro forma earnings reports in both periods. However, they appear to discount at least some potentially misleading pro forma earnings disclosures more in the post-SOX period. Finally, our results imply that the regulation of pro forma reporting has increased the average quality of pro forma earnings disclosures by filtering out those that are most likely to be misleading. These results are consistent with the conclusions that (1) the quality of pro forma reporting has improved following SOX, and (2) investors’ perceptions of pro forma earnings metrics have changed in the post-SOX regulatory environment.

Earning Management: Is it Good or Bad?

Use of accounting discretion to address financial statements seems to be eroding public confidence in the financial reporting process. Some managers are abusing GAAP’s afforded discretion to manage earnings thus reducing the quality of the financial reporting process and ultimately bring adverse effects on resource allocation in the economy. Market participants, legislators, regulators, and academics are concerned in order for them to have the need to control financial reporting abuses. In this paper, I briefly analyze the recent literature and theories on earnings management and show the techniques used by managers to manipulate earnings. I found strong incentives and reasons for managers to report such smooth and increasing earnings by the: a) increase market capitalization; b) enhance management compensation and job security; and c) reduce the company’s cost of capital. The evidence found suggests that the managers used: a) big bath restructuring charges; b) miscellaneous cookie jar reserves (a hidden reserve that do not show up on the balance sheet (understating values) which can be used to adjust quarterly earnings reports c) premature and aggressive revenue recognition; and d) creative acquisition accounting and purchased R&D to manage earnings.

YEAR ENDS ON HIGH NOTE

EARLY EARNINGS REPORTS show the chemical industry wrapped up 2010 with a strong finish. Firms saw both sales and earnings continue to expand in what is normally a slow quarter. At DuPont, fourth-quarter sales increased 15.3% to $7.4 billion, and earnings grew at a similar rate of 15.2% compared with the year-ago quarter. The company was able to raise prices as well as sales volumes, particularly in its electronics and performance chemical businesses. Ellen J. Kullman, DuPont’s CEO, reflected on the full year’s results in a conference call with investors, saying, “We will look back on 2010 as the year we benefited from recovery, created our own momentum, and emerged as a stronger, well-positioned company.” According to Laurence Alexander, chemicals analyst at Jefferies & Co., DuPont’s earnings per share of 50 cents beat consensus expectations by 18 cents. With the recession over, he wrote in a note to clients, the “investment case shifts to ...

The Earnings and Social Security Contributions of Documented and Undocumented Mexican Immigrants

Using information supplied by immigrants interviewed by the Mexican Migration Project (MMP) we analyze the Social Security coverage of jobs held by legal and other-than-legal Mexican immigrants who work in the United States. Our analysis suggests that about half the Mexican-born migrants residing in the United States who are wage earners and heads of household earn their incomes in jobs that are not covered by Social Security. Since workers in uncovered jobs tend to earn below-average wages, their earnings account for less than half the wages earned by Mexican immigrants. Evidence from the MMP survey shows that Social Security coverage is higher among Mexican immigrants who are authorized to live in the United States than it is among undocumented Mexican immigrants. Coverage among working legal permanent residents is less than 75 percent, but the coverage rate among undocumented workers is even lower, about 25 percent. Based on annual earnings reports in the March CPS we estimate that in 2007 about 1.4 percent of all U.S. wages, or $87 billion, was earned by Mexican immigrant heads of household. Our estimates imply that about 52 percent of this total was earned in Social-Security-covered jobs while the remainder, about $41 billion, was earned in jobs not covered by Social Security. The MMP surveys show that only a small proportion of undocumented migrants report a change in their legal status that allowed them to live and work legally in this country. Two-thirds of legalizations occurred within five years of the enactment of the Immigration Reform and Control Act in 1986. In the absence of this kind of special legislation, only a small percentage of undocumented workers is likely to be granted permanent residency status in the future. Thus, the Social-Security-covered wages of most of the undocumented workers who earn them will never result in an increased claim for Social Security benefits.

Does Chatter Really Matter? Dynamics of User-Generated Content and Stock Performance

User-Generated Content in online platforms or chatter for short provides a valuable source of consumer feedback on market performance of firms. This study examines whether chatter can predict stock market performance, which metric of chatter has the strongest relationship, and what the dynamics of the relationship are. The authors aggregate chatter (in the form of product reviews) from multiple websites over a four year period across six markets and fifteen firms. They derive multiple metrics of chatter (volume, positive chatter, negative chatter, and 5-start ratings) and use multivariate time series models to assess the short and long term relationship between chatter and stock market performance. They use three measures of stock market performance: abnormal returns, risk, and trading volume.The findings reveal that two metrics of chatter can predict abnormal returns with a lead of a few days. Of four metrics of chatter, volume shows the strongest relationship with returns and trading volume, followed by negative chatter. Whereas negative chatter has a strong effect on returns and trading volume with a short “wearin” and long “wearout,” positive chatter has no effect on these metrics. Negative chatter also increases volatility (risk) in returns.A portfolio analysis of trading stocks based on their chatter provides a return of 8% over and above normal market returns. In addition to the investing opportunities, the results show managers that chatter is an important metric to follow to gauge the performance of their brands and products. Because chatter is available daily and hourly, it 2 can provide an immediate pulse of performance that is not possible with infrequent sales and earnings reports. The fact that negative chatter is more important than positive, indicates that negatives are more diagnostic than positives. The negatives suggest what aspects of the products managers should focus on.

Earnings Quality Metrics and What They Measure

This paper provides a theory of earnings quality metrics, explaining what they capture and how they are related with each other. We develop a simple economy in which a manager has market price, earnings, and smoothing incentives and can bias earnings reports. This economy provides a framework for the analysis of earnings quality metrics. We express value relevance, persistence, predictability, smoothness, and discretionary accruals in terms of their primitives, the manager’s incentives, operating risk, and accounting noise, and examine their behavior on varying these primitives. We find that some of them, particularly value relevance and persistence, trace closely the change in information content in our setting. In contrast, smoothing and discretionary accruals reflect the rational market reaction to the earnings reports inconsistently. These results provide guidance for understanding and selecting metrics in empirical tests.

STRONG DEMAND BUOYS CHEMICALS

THE CHEMICAL INDUSTRY’S financial results in the second quarter were a triumph, especially when compared with the lousy second quarter of 2009. Many chief executive officers, although happy to point to strong quarterly profits, warned that the rest of 2010 will not be as dramatically positive. Overall, the 22 companies tracked by C&EN saw sales shoot up by 21.1% and earnings rise a stunning 89.6% in the second quarter. In earnings reports, chemical executives emphasized that for most product families, the majority of the revenue increase came from higher sales volumes, as opposed to higher prices, a signal that manufacturer demand for chemical raw materials is rebounding. The increased demand carried over from the first quarter, when the economy was regaining traction after the recession. Celanese CEO David Weidman summarized the quarter’s results when he said, “Product demand across all regions and industries remained strong and reflected an ongoing, modest global economic recovery.” ...

SALES AND EARNINGS TURN POSITIVE

FOURTH-QUARTER EARNINGS reports show that the chemical industry has begun to emerge from the wreckage of the worldwide economic collapse. Compared with the disastrous fourth quarter of 2008, companies in C&EN’s earnings index increased sales by an average of 2.1% and earnings by 1.9%. Of the 20 companies on the list, nine increased quarterly earnings by more than 100%. But the reports were not uniformly positive. Three firms—FMC Corp., Mosaic, and Nalco—saw earnings decline compared with last year’s quarter. And nine firms, or almost half of those in the index, saw quarterly sales decline year over year. As the worldwide economy began its slow, fragile rebound, many companies paid close attention to quarter-to-quarter sales figures. Compared with the third quarter, only 12 of the 20 firms saw sales go up. Executives at the chemical firms say they see signs of strengthening demand. Both Dow Chemical and DuPont reported that sales volumes increased 10% from ...

STRONGER DEMAND IN FOURTH QUARTER

EARLY REPORTS of fourth-quarter earnings in the chemical industry suggest that demand for a wide variety of products has improved noticeably, giving executives reason to be optimistic about 2010. The year-over-year results are almost guaranteed to look good because the last quarter of 2008 was horrible for chemical firms. For example, DuPont earned $402 million for the quarter, compared with a loss of $249 million in 2008. In a conference call with analysts, DuPont CEO Ellen J. Kullman struck a triumphant note. “We delivered 10% sales growth in the quarter, with volume increases in every region,” she said. David Begleiter, a research analyst with Deutsche Bank, points out in a report to investors that DuPont’s earnings per share of 44 cents beat consensus expectations by 4 cents and observes that “the upside was driven by better-than-expected volume growth.” DuPont’s $6.4 billion in sales reflected growth in five of six segments, including a 22% increase in ...

The Impact of Auditors’ Experiences with their Clients on the Consistency and Bias in Earnings Reporting and Auditors’ Independence

Using auditor tenure as a proxy for auditors’ experiences, this paper considers the relationship between auditors experiences with specific clients and financial reporting quality of the clients. We specifically study whether auditors’ experiences with specific clients increase the consistency in earnings reporting, decrease the downward bias in the reported earnings, and increase auditors’ independence. We use the standard deviation of both non-operating and abnormal non-operating accruals for a three year period centered on the current year to measure the consistency in earnings reporting; we use the average of both non-operating and abnormal non-operating accruals for a three year period centered on the current year to measure the relative bias in earnings; we use the change in both non-operating and abnormal non-operating accruals in the two years prior to a seasoned equity offering to measure earnings management. We find that auditors’ experiences are negatively associated with the standard deviation of both non-operating and abnormal non-operating accruals, positively associated with the average non-operating and abnormal non-operating accruals, and negatively associated with the change of non-operating and abnormal non-operating accruals prior to the seasoned equity offering. These results indicate that auditors’ experiences can reduce volatility and bias in earnings reporting, and improve auditors’ independence.

Reforms in the Korean Financial Reporting Systems and Earnings Quality

This study examines the effect of reforms in the Korean financial reporting systems on earnings quality through an investigation of two sample periods: (1) prior to, and (2) after the 1997 financial crisis in Korea. The results indicate that financial sector reforms have reduced the opacity of Korean firms’ earnings reports.

DEMAND STABILIZES IN SECOND QUARTER

IT’S RARE TO FIND good news in a collection of earnings reports that show heavy declines from the previous year. In the second quarter, the 23 firms tracked by C&EN suffered a combined earnings rollback of 55.1% compared with last year’s second quarter. But the drop was less than the damage of the first quarter, when the group’s earnings plunged 68.1% year-over-year. In announcing second-quarter earnings, chemical executives implied, but did not promise, that the worst effects of the global recession are now over. In fact, 20 firms reported slight sales increases from the devastating first quarter, and 18 improved their earnings. Only Cytec Industries, Ferro, and Huntsman Corp. booked losses in the quarter. For the most part, companies are focused on cost savings, rather than preparing for a recovery that may not come until 2010. Industry leaders Dow Chemical and DuPont both reported $600 million in cost cuts so far in 2009, and both ...

EARNINGS Dow and BASF beat expectations by earning profits while demand sinks

The world’s two largest chemical companies, BASF and Dow Chemical, surprised analysts by staying in the black in the first quarter. In earnings reports released late last week, both firms said that company-wide cost cutting, lower raw material costs, and strong sales in agriculture businesses cushioned the impact of steeply lower volumes in chemicals, plastics, and specialties businesses. The two companies will further cut production and eliminate jobs. At BASF, sales dropped 23% from last year’s first quarter to $16.2 billion, and earnings fell by 64% to $573 million. In remarks to shareholders, Chairman Jurgen Hambrecht said BASF will cut at least 2,000 positions by the end of 2009 through plant closures and sales. There is “no sign of a turnaround,” he said. BASF’s results were “significantly better than what I had expected and what the market expected,” says Commerz-bank chemical analyst Stephan Kippe. He says BASF was able to lower fixed costs by reacting ...

Accounting and the Truth of Earnings Reports: Philosophical Considerations

This paper investigates the philosophical nature of accounting reports of earnings. Standard setters' authoritative pronouncements (conceptual frameworks, GAAP, EITFs, etc.) hold to the realist philosophical view that true earnings reports are ex post representations of some ex ante out-there, preexisting, extra-linguistic real economic increase in the enterprise's wealth. Contra this view, in practice financial accounting executives, in league with investment analysts, routinely engage in earnings management and manipulation in order to satisfy the capital market's insatiable demands for earnings levels which will support and enhance the enterprise's stock market price. The paper considers this state of affairs from Harold Frankfurt's truth, lies and ‘bullshit’ treatise (2005, 2006). It sees earnings reports as ‘short of lies’, and so the accountants can only be faulted for their indifference to the truth and for giving the impression that they are trying to present the truth. A poststructuralist philosophical perspective, however, problematizes this conclusion on the basis that accounting language is not a transparent medium but rather is the material used to manufacture accounting ‘truths’. It sees accounting ‘truths’ as contingent upon linguistic doctrinal accounting discourses currently ceded place of privilege by standard setters and upon the subjective considerations of accountants when they produce reports of earnings. The paper concludes that both Frankfurt's perspective and that of poststructuralist philosophers can provide valuable insights into this ironic state of affairs.

Accounting and the Truth of Earnings Reports: Philosophical Considerations

This essay investigates the philosophical nature of accounting reports of earnings. Standard setters' authoritative pronouncements [conceptual frameworks, GAAP, EITFs, etc.] hold to the realist philosophical view that true earnings reports are ex post representations of some ex ante out-there, preexisting, extralinguistic real economic increase in the enterprise's wealth. Contra this view, in practice financial accounting executives, in league with investment analysts, routinely engage in the earnings management and manipulation in order to satisfy the capital market's insatiable demands for earnings levels which will support and enhance the enterprise's stock market price.The essay considers this state of affairs from Harold Frankfurt's [2005, 2006] truth, lies, and bullshit treatise. It sees earnings reports as short of lies, and so the accountants can only be faulted for their indifference to the truth and for giving the impression that they are trying to present the truth. A poststructuralist philosophical perspective, however, problematizes this conclusion on the basis that accounting language is not a transparent medium but rather is the material used to manufacture accounting truths. It sees accounting truths as contingent upon linguistic doctrinal accounting discourses currently ceded place of privilege by standard setters and upon the subjective considerations of accountants when they produce reports of earnings. The essay concludes that both Frankfurt's perspective and that of poststructuralist philosophers can provide valuable insights into this process.

Reported Earnings and Analyst Forecasts as Competing Sources of Information: A New Approach

Givoly (1985) provides formal evidence on the relation between the past history of earnings and their own forecast. Our study uses a new methodology, modified Granger causality tests, to further analyze the information flows between earnings and forecasts. Our application of this widely acclaimed time series approach complements existing cross-sectional studies by abstracting from stock market reactions to information, and focusing on the dynamic interaction between reported earnings and analysts' forecasts. Based on long time series of analyst earnings forecasts and reported earnings, we provide formal and compelling evidence of bi-directional causality. Further, we report that the lag structure in information flows is longer than has been documented in the previous literature. This is consistent with our expectation that, in addition to past earnings reports, the forecasts themselves make a significant contribution to the information that is reflected in future earnings. However, the presence of feedback also suggests that past earnings reports as well as past forecasts are incorporated into later forecasts. Collectively, our findings imply that the information in earnings reports has inherent positive value and that forecasts do not fully substitute for earnings releases.

Earnings announcement timing and earnings management1

This study examines whether earnings announcement timing is associated with earnings management. Unlike prior studies, we partition earnings reporting delay into two separate components: audit report lag and management discretionary lag. Using recent data, we find that less earnings management by late earnings reporters are attributable to auditors rather than management. After controlling for other factors, we show that auditors who lengthen their audit work are likely to permit less earnings management, possibly to minimize their litigation risk. This drives a negative association between total report lag and earnings management. However, no statistically significant association is found between management discretionary lag and earnings management. We find a positive association between management discretionary lag and earnings management only in the sub-sample where earnings were disclosed after the audit report date. 1 Data is publicly available from sources identified in the article.

The Unappreciated Value of Marketing: The Moderating Role of Changes in Marketing and R&D Spending on Valuation of Earnings Reports

Because current earnings predict future financial performance, the stock market reacts strongly to earnings announcements. How rapidly and in what manner information about marketing actions and strategies is accounted for in the stock valuation is less clear. We examine the financial market's ability to fully and timely value marketing-related information released along with quarterly earnings announcements. We find evidence consistent with the market initially under-appreciating marketing and R&D effort. Specifically, we find differences in the immediate market response to earnings announcements for firms expanding versus reducing their marketing and R&D effort. However, we also observe a significantly greater positive stock price drift (i.e., systematic stock price adjustment) in the months following an earnings announcement for firms increasing marketing and/or R&D expenditures. We examine the dynamics and the mechanism underlying this differential drift. Firms increasing their marketing and/or R&D spending report significantly greater future operating performance than firms decreasing their marketing and R&D spending and the stock price adjustment (drift) accelerates around the time of the subsequent earnings announcement. Our findings suggest that the stock market takes time to fully incorporate implications of strategic marketing decisions. They also suggest the stock market tends to update firm valuation when the outcomes of marketing strategies are realized in future financial performance and new performance signals are sent to the market.

An Evaluation of Value Relevance of Consolidated Earnings and Cash Flows Reporting in India

An Evaluation of Value Relevance of Consolidated Earnings and Cash Flows Reporting in India