Expectations Of Future Performance Research Articles

How does competition affect real earnings management to meet or beat targets? Evidence from import tariff reductions

Targets provide incentives for earnings management, and a longstanding question is whether earnings management is undertaken opportunistically or to communicate private information about future firm value. To discriminate between these motivations, I follow analytical research showing that an increase in competition through a large decrease in tariffs disciplines managers and better aligns their interests with those of shareholders. Thus, if earnings management reflects managerial opportunism, then an increase in competition will decrease earnings management; and if it signals future performance expectations, then an increase in competition will increase earnings management. Consistent with earnings management indicating managerial opportunism, I show that an increase in competition decreases real earnings management to avoid reporting negative earnings or a negative change in earnings. In addition, by showing that the lessening of trade barriers through import tariff reductions reduces the use of real earnings management to meet or beat earnings targets, I provide evidence on the role of macroeconomic conditions as a determinant of earnings quality.

Product Market Competition and Real Earnings Management to Meet or Beat Earnings Benchmarks

Targets provide incentives for earnings management, and a longstanding question is whether earnings management is undertaken opportunistically or to communicate private information about future firm value. To discriminate between these motivations, I follow analytical research showing that an increase in competition through a large decrease in tariffs disciplines managers and better aligns their interests with those of shareholders. Thus, if earnings management reflects managerial opportunism, then an increase in competition will decrease earnings management; and if it signals future performance expectations, then an increase in competition will increase earnings management. Consistent with earnings management indicating managerial opportunism, I show that an increase in competition decreases real earnings management to avoid reporting negative earnings or a negative change in earnings. In addition, by showing that the lessening of trade barriers through import tariff reductions reduces the use of real earnings management to meet or beat earnings targets, I provide evidence on the role of macroeconomic conditions as a determinant of earnings quality.

Interpreting the Stock Returns to New Product Announcements: How the past Shapes Investors’ Expectations of the Future

Investors routinely follow firms’ communications and actions to form expectations about the firms’ future performance. The authors propose a set of firm and industry characteristics that influence the formation of investor expectations in the context of new product announcements. Specifically, they argue that positive expectations of future innovation output should cause an ex-ante increase in stock prices and a smaller ex-post market reaction when an actual new product is announced. Using a sample of 4,865 new product announcements made by 826 publicly traded U.S. firms, the authors show that the stock market reaction to a new product announcement measured in a five-day window around the announcement is negatively related to (1) the number of new products previously announced by the firm, (2) the average number of new products previously announced by the firm's competitors, and (3) the average sentiment of past public news about the firm. These three factors are also positively related to the market value of the firm measured immediately before each new announcement, controlling for increases in firm value directly attributable to past new product announcements. In contrast to many articles in the marketing literature that imply that the added value of a marketing event can be fully assessed from the stock market reaction to the announcement of the event, the authors clarify that for recurrent events or events that are part of a firm's broader strategy, this reaction reflects only an update of investors’ expectations of future firm performance.

Positive Stereotype Validation: The Bolstering Effects of Activating Positive Stereotypes After Intellectual Performance.

Past research has found that members of stigmatized groups may feel more certain of poor performance when negative stereotypes are made accessible after finishing a task (i.e., stereotype validation). However, no research to date has identified the potential effects of activating positive stereotypes after performance. Based on past research and theory, we hypothesized that such positive stereotype validation may serve to bolster-rather than hinder-important beliefs related to one's abilities and future task performance. Across three studies, the accessibility of positive group stereotypes was manipulated after participants completed an initial test on a topic. Consistent with predictions, the activation of positive, self-relevant stereotypes after the initial test was found to increase how certain participants were that they performed well on it. Furthermore, these increases in evaluative certainty predicted more positive ability beliefs, higher expectations for future performance, and better performance on a follow-up test that participants completed.

Competition as a Discovery Procedure in the P ractice of Accounting

Even though they developed separately as two distinct disciplines, there is a complex relationship between accounting and econom-ics. For example: 1) accounting is a means that makes economic calculation possible; it provides the managers, the investors and lenders (current and potential), and the public in general with in-formation that aids them in assessing the profitability and the ap-propriate use of resources of a business. Although mainly histori-cal, accounting information allows them to form an expectation of future performance and hence it is useful for making economic decisions; 2) economics theorizes on the same ele-ments which ac-counting endeavors to measure; 3) the market for financial report-ing, i.e. for the financial statements and other information dis-closed periodically by companies, which is one of the products of an accounting system, is a market like that of any other good or ser-vice and it is therefore subject to the same economic analysis.
 Given this complex relation-ship, there are several paths an eco-nomic work on accounting could take.
 This author will approach his study first by acknowledging that accounting is an evolving institution, one of spontaneous forma-tion that has not yet reached, and probably will never reach, its fi-nal form. Although its form and practice has been subjected to regulation by dif-ferent governments and governmental agencies for centuries, in particular the market for fi-nancial reports of pub-lic companies, that fact does not change its spontaneous character. The author will also argue that competition is underutilized as a discovery procedure in accounting in general and in the prepara-tion of financial reports in particular. As a consequence of govern-ment intervention, better and less expensive ways of serving the consumers of financial reports have not yet been discovered under the current system.
 As an economist and practicing accountant, this author could be tempted to try to prescribe the form and substance of the finan-cial reports. Although admittedly economics could inform a lot about this, and the author does not deny the importance of those investigations for the marketplace of ideas, one of the main conclu-sions of this essay is that one of the tasks of competition is pre-cisely to discover the characteristics of the goods and services that best serve the consumers and hence, to discover the substance and form of the financial reports that best aid the users for their par-ticular ends.
 After this introduction, in the second part of this essay, the au-thor will summarize the conceptions that Friedrich A. Hayek de-veloped and that are relevant for his analysis. In the third part, an elaboration of accounting as a language is provided. In the fourth part, a brief summary of the history of accounting, since the spon-taneous emergence of the double entry bookkeeping system in me-dieval Europe until our times, will be presented, along with the origin and alleged justifications of government intervention in ac-counting. In the fifth part, the author will enumerate some of the problems presented by such intervention. In the sixth part, to con-clude this essay, a general prediction of a free market in accounting services will be presented.
 Financial reporting is a subset of accounting. Usually the same system fulfills several ends such as filling tax statements (tax ac-counting), tracking and allocation of cost elements to different products or services (cost accounting) and the preparation of fi-nancial reports for external users such as current and potential lenders and investors (financial accounting). In this work, the ar-guments are addressed in general to accounting and in particular to financial reporting. When names such as financial reporting, financial reports, financial accounting, external reporting and oth-ers similar are not explicitly mentioned, the arguments should be understood as applying to accounting in general.

Watching the Glass Ceiling: An Investigation of Financial Presentation Modality and Gender Bias

We investigate how presentation modality (text vs. video) and executive gender influence evaluators’ perceptions of management competence and the future performance potential of that executive’s company. Consistent with recent labor market research (Shroeder and Epley 2015), seeing and hearing (rather than reading) identical information from a CEO improves the competence assessment of the CEO; however, this result is largely gender dependent. Male-delivered financial reports enhance participant views of CEO competence while female-delivered reports do not. In addition, male-led firms have expectations of enhanced future company performance that are only partially mediated by views of CEO competence. While we find modest evidence that the female competence disadvantage is associated with industry (because female CEO competence is marginally improved in a ‘feminine’ industry), we find no evidence that a female-led company enjoys enhanced expectations of future company performance.

Say on Pay: Do Shareholders Care?

This paper examines the impact of enhanced executive remuneration disclosure rules under UK regulations introduced in 2013 on the voting pattern of shareholders. Based on a hand-collected dataset on the pay information disclosed by FTSE 100 companies, we establish that shareholders guide their vote by top line salary, and appear to disregard the remaining substantial body of information provided to them. Analyzing the unique British feature of two votes, one forward looking and one backward looking, we establish that shareholders differentiate between the two dimensions in about 23% of the cases. In contrast to the rationale of the legislation that introduced the two votes, however, differentiating voting behavior is not driven by characteristics of the executive’s remuneration policy, but mainly by exceptionally positive future performance expectations.

The Study of the Relationship of Conditional Conservatism for the Market-to-Book Ratio and Tobin’s Q

This study evaluated the relationship between market-to-book ratio and Tobin’s Q and accounting conservatism. An important factor in adopting conservative approaches is the increased competitive pressures. Nevertheless, conservative approach reduces expectations of future performance of the businesses. This study used the data from companies listed in TSE during 2008 to 2013. Basu’s model was used to assess conditional conservatism. To evaluate the effect of market-to-book ratio and Tobin’s Q on conditional conservatism, these variables were added to Basu’s model. The tests showed a negative significant relationship between Tobin’s Q and conditional conservatism. However, the results showed no significant relationship between market-to-book ratio and conditional conservatism.

Efeitos das distâncias e recursos da empresa no desempenho exportador de empresas

O objetivo deste artigo é avaliar o efeito da distância sobre o desempenho exportador das empresas de Santa Catarina e em que medida tal efeito é moderado pelas características das equipes de exportação e pelos recursos organizacionais. A literatura indica que quanto maior a distância, menor é o desempenho exportador. Foi utilizada regressão linear múltipla e análise de variância a partir de levantamento de atributos e satisfação de exportação em uma amostra final de 49 empresas produtoras exportadoras. Os resultados confirmaram que quanto maior a distância institucional, menor é o desempenho exportador. Foi confirmado o efeito moderador dos recursos da organização, pois a experiência internacional, o conhecimento de mercado, as formas de negociação e os comportamentos da equipe possuem relação positiva com maior desempenho exportador, bem como, o planejamento estratégico influencia o valor total de exportações, o crescimento no volume, e os resultados gerais.

Satisfaction with Past Financial Performance, Risk Taking, and Future Performance Expectations in the Family Business

Prior research has shown that past financial performance and risk‐taking proclivity influence firms' goal setting and future performance expectations. In this study, we analyze how such factors manifest themselves in the context of the family business. Drawing from the behavioral theory of the firm, we argue that owners–managers of family firms satisfied with their past financial performance will correspondingly upgrade their future performance expectations. Based on strategic reference points theory, we also propose that satisfaction with past performance in family firms will be negatively associated with risk taking. Finally, we conjecture that family firms may exhibit heterogeneity in their risk orientation so that greater risk taking will be positively associated with family firms' future performance expectations. The results of structural equation modeling analysis of two combined surveys of family firms supported the hypotheses.

Attracting Attention in a Limited Attention World: Exploring the Causes and Consequences of Extreme Positive Earnings Surprises

We investigate why extreme positive earnings surprises occur and the consequences of these events. We posit that managers know before analysts when extremely good earnings news is developing, but can have incentives to allow the earnings news to surprise the market at the earnings announcement. In particular, managers can use an extreme positive earnings surprise to attract investor attention when they believe their stock is neglected and future performance is expected to be strong. Analysts, who must allocate scarce resources across many firms, can also be inattentive and miss signals that suggest good performance is going to be announced. Using various proxies for extreme positive earnings surprises, management expectations for future performance and desire for attention, and analyst neglect, we find evidence that an extreme positive earnings surprise is a predictable event. These findings are incremental to controlling for a firm’s information environment, earnings volatility, and operating leverage. Finally, we show that extreme positive earnings surprises are a successful method for attracting attention, with significant increases in the number of institutional owners, the number of analysts, and trading volume during the subsequent three years. This paper was accepted by Mary Barth, accounting.

Anxiety symptom interpretation and performance expectations in high-anxious, low-anxious, defensive high-anxious and repressor individuals

To date, no research has investigated score predictions and anxiety interpretation in high-anxious, low-anxious, defensive high-anxious and repressor individuals. This study examined Eysenck’s (1997) predictions for cognitive biases on future performance expectations in all four groups. This study was conducted in an ecologically-valid sporting environment. Competitive shooters completed the Marlowe–Crowne Social Desirability Scale and the Sport Anxiety Scale prior to a major competition. Percentile splits identified the four defensiveness/anxiety groups. The modified Competitive Sport Anxiety Inventory-2 was used to assess the intensity and direction of anxiety prior to competition. Participants predicted their expected shooting score. The hypothesis that repressors would interpret their anxiety as more facilitative to performance compared to low-anxious individuals was partially supported. Repressors were more optimistic in their performance prediction in contrast to defensive high-anxious performers who, in turn, were more pessimistic compared to the other two groupings. High-anxious performers, contrary to predictions, demonstrated optimism in their future performance. The findings of this study corroborate the theoretical predictions and the evidence from previous studies with sport performers. Future research should continue to investigate the influence of cognitive biases on performance predictions in sporting environments using Weinberger et al.’s classifications.

How Firm Performance Moderates the Effect of Changes in Status on Investor Perceptions: Additions and Deletions by the Dow Jones Sustainability Index

Research has long studied how corporate social responsibility (CSR) activities affect financial market evaluations of firm value, but we know little about how investors use new information about changes in CSR to update their assessments of firm value. This paper argues that firm performance moderates the degree to which investors respond to new information about CSR activity. Using a large-scale financial event study of additions and deletions by the Dow Jones Sustainability Index (DJSI), we show that firms with strong financial performance gain fewer benefits for being recognized as CSR leaders, while bearing fewer penalties for losing recognition as CSR leaders. Intriguingly, analyst expectations of future performance have stronger moderating impact than historical accounting performance.

A new qualitative method for the condition assessment of earth and rockfill dams

This article presents a new qualitative method, based in efficient indexes, for the condition assessment of groups of dams in operation. After a brief overview of the method, the proposed indexes, their descriptors and aggregation rules are presented, as well as the steps for its application and general guidelines for the classification and sorting of the examined dams, aiming to achieve optimal scheduling of more elaborate condition assessment and/or rehabilitation works. The method developed was applied to 36 Portuguese dams in operation. The results obtained agree with the available information about the dams under investigation, their condition and the expectation of future performance.

Offshore wind power resource availability and prospects: A global approach

Abstract In the absence of structural incentives that price negative externalities, renewable energies rely primarily on investors’ expectations of future performance to succeed in the marketplace. While there have been many disparate regional analyses of the prospects for clean energy, in particular wind, there is yet a cohesive framework for thinking about global interactions. Using data from the National Renewable Energy Laboratory (NREL), the article addresses three shortcomings in empirical renewable policy literature. First, the article briefly synthesizes the current state of the offshore wind literature. Second, the article develops a linear programming model to assess the relative prospects of offshore wind energy throughout seven world regions: Organization for Economic Co-operation and Development (OECD) North America, OECD Europe, OECD Asia and Eurasia, Non-OECD Europe and Eurasia, Non-OECD Asia, Africa, and Central & South America. Third, the article applies the Interactive Agency Model (IAM) as a systems-level framework for thinking about offshore wind development in the presence of social, economic, and institutional attributes. Results suggest that OECD Asia and Eurasia, OECD Europe, and non-OECD Europe and Eurasia, respectively, have the highest potential for offshore wind sector performance. Despite simplifying assumptions, this article presents one of the first evaluations of global offshore wind energy potential for policymakers and industry to consider in crafting future renewable energy investment decisions.

Momentum and Organizational Risk Taking: Evidence from the National Football League

This study examines how momentum shapes organizational risk taking. We define momentum as a sustained and systematic trajectory in performance over time, and we argue that such trends impact interpretations of current performance as well as expectations of future performance. Drawing on the variable focus of attention model, we posit that momentum therefore directs the focus of organizational attention between concerns of aspirations, survival, and slack. Our conceptual model accounts for momentum that occurs within a performance period as well as that which occurs across periods. We propose that within- and across-period momentums are unique in terms of when and how each type impacts risk taking. We tested and found support for our hypotheses in the context of 22,603 play-by-play decisions made by the 32 teams of the National Football League during the 2000–2005 regular season games. Theoretical and practical implications are discussed. This paper was accepted by Jesper Sørensen, organizations.

The Importance of Ability and Effort in Recruiters' Hirability Decisions: An Empirical Examination of Attribution Theory

Weiner's attribution theory was used to examine the attributions made by recruiters during a selection interview and their subsequent hiring decisions. A quasi‐experimental design was used in which level of ability (high, low) and effort (high, low) was manipulated. The impact of the manipulations on three outcomes was examined: (1) expectations of future job performance, (2) perceived level of responsibility for the failure, and (3) hiring recommendations. Seventy experienced recruiters from an Australian organisation read four transcripts of interview segments about a job applicant's response to missing a deadline. Findings were consistent with attribution theory; recruiters detected differences in the causes of past work outcomes offered by applicants, which in turn affected their expectations about future work performance, responsibility for failure, and recommendations to hire.

Simulating the drug discovery pipeline: a Monte Carlo approach

BackgroundThe early drug discovery phase in pharmaceutical research and development marks the beginning of a long, complex and costly process of bringing a new molecular entity to market. As such, it plays a critical role in helping to maintain a robust downstream clinical development pipeline. Despite its importance, however, to our knowledge there are no published in silico models to simulate the progression of discrete virtual projects through a discovery milestone system.ResultsMultiple variables were tested and their impact on productivity metrics examined. Simulations predict that there is an optimum number of scientists for a given drug discovery portfolio, beyond which output in the form of preclinical candidates per year will remain flat. The model further predicts that the frequency of compounds to successfully pass the candidate selection milestone as a function of time will be irregular, with projects entering preclinical development in clusters marked by periods of low apparent productivity.ConclusionsThe model may be useful as a tool to facilitate analysis of historical growth and achievement over time, help gauge current working group progress against future performance expectations, and provide the basis for dialogue regarding working group best practices and resource deployment strategies.

Sustainability of teacher expectation bias effects on long-term student performance.

In this article, we address the relationship between teacher expectation bias and student characteristics, its effect on long-term student performance, and the development of this effect over time. Expectation bias was defined as the difference between observed and predicted teacher expectation. These predicted expectations were estimated from a multilevel model in which teacher expectations of students' future performance in secondary education were regressed on students' prior achievement, IQ, and achievement motivation. Multilevel analyses were performed on a data set of about 11,000 students who entered secondary school in 1999 and who were monitored for 5 years. We found relationships between teacher expectation bias and student characteristics as well as a clear effect of expectation bias on long-term student performance. Teacher expectation bias partly mediated the effects of student characteristics on students' performance. Moreover, its effect was moderated by some of these characteristics. Mediation and moderation effects were the strongest for parents' aspirations. The effects of teacher expectation bias dissipated partly during the first 2 years but afterwards remained stable over time.

The Expectations Clock: A Unified Model for Over- and Under-Reaction

The expectations clock illustrates how expectations of future performance are driven by human biases tied to current and past changes in performance. Performance changes over time, so expectations may cycle between improving and declining and high and low. Expectations may be highest when current and past changes in performance are above average, and may be lowest when current and past changes in performance are below average. The clock is a model of over- and under-reaction, and hence, of reversion and momentum. Over- and under-reaction refer to reactions to negative circumstances. Depending on initial expectations, negative events may be disregarded or accentuated in the decision-making process. When expectations are high, negative events may be ignored, resulting in under-reaction and short-term momentum, and when expectations are low, negative circumstances may be over-emphasized, causing over-reaction and long-term reversion.