Does the stock market fully appreciate the implications of leading indicators for future earnings? Evidence from order backlog

Review of Accounting Studies

Volumn 8, Issue 4, 2003, Pages 461-492

  Rajgopal, Shivaram ^a   Shevlin, Terry ^a   Venkatachalam, Mohan ^b  

^a UNIVERSITY OF WASHINGTON   (United States)

^b DUKE UNIVERSITY   (United States)

Author keywords

Analyst forecasts; Backlog; Leading indicator; Market efficiency; Mispricing

Indexed keywords

EID: 3843103628     PISSN: 13806653     EISSN: None     Source Type: Journal    
DOI: 10.1023/A:1027364031775     Document Type: Article

References (64)

1. Abarbanell, J. (1991). "Do Analysts' Forecasts Incorporate Information in Prior Stock Price Changes?" Journal of Accounting and Economics 14, 147-165.
2. Abarbanell, J. and V. Bernard. (1993). "Tests of Analysts' Overreaction/Underreaction to Earnings Information as an Explanation for Anomalous Stock Price Behavior." Journal of Finance 47, 1187-1207.
3. Abarbanell, J. and R. Lehavy. (2000). "Differences in Commercial Database Reported Earnings: Implications for Inferences Concerning Analyst Forecast Rationality, the Association between Prices and Earnings, and Firm Reporting Discretion." Working paper, University of North Carolina at Chapel Hill and University of Michigan.
4. Abel, A. and F. Mishkin. (1983). "An Integrated View of Tests of Rationality, Market Efficiency and the Short Run Neutrality of Monetary Policy." Journal of Monetary Economics 11, 3-24.
5. Ahmed, A. S., K. Nainar, X. Zhang and J. Zhou. (2002). "Do Analysts' Forecasts Fully Reflect the Information in Accruals?" Working paper, Syracuse University.
6. Ali, A., A. Klein and J. Rosenfeld. (1992). "Analysts' Use of Information about Permanent and Transitory Earnings Components in Forecasting Annual EPS." The Accounting Review 67, 183-198.
7. American Institute of Certified Public Accountants (AICPA). (1994). Improving Business Reporting - A Customer Focus: Meeting the Information Needs of Investors and Creditors. New York, NY: AICPA.
8. American Accounting Association (AAA), Financial Accounting Standards Committee. (2002). "Recommendations on Disclosure of Nonfinancial Performance Measures." Accounting Horizons 16, 353-362.
9. Amir, E. and B. Lev. (1996). "Value-Relevance of Nonfinancial Information: The Wireless Communications Industry." Journal of Accounting and Economics 22, 3-30.
10. Barth, M. E., R. Kasznik and M. F. McNichols. (2001). "Analyst Coverage and Intangible Assets." Journal of Accounting Research 39, 1-34.
11. Banker, R., G. Potter and D. Srinivasan. (2000). "An Empirical Investigation of an Incentive Plan that Includes Nonfinancial Performance Measures." The Accounting Review 75, 65-92.
12. Basu, S. (1977). "The Investment Performance of Common Stocks in Relation to their Price to Earnings Ratios: A Test of the Efficient Markets Hypothesis." Journal of Finance 32, 663-662.
13. Beaver, W. H. (1970). "The Time Series Behavior of Earnings." Journal of Accounting Research 8, 319-346.
14. Beaver, W. H. and M. F. McNichols. (2001). "Do Stock Prices of Property Casualty Insurers Fully Reflect Information about Earnings, Accruals, Cash flows, and Development?" Review of Accounting Studies 6, 197-220.
15. Behn, B. K. (1996). "Value Implications of Unfilled Order Backlogs." Advances in Accounting 14, 61-84.
16. Bernard, V. (1987). "Cross-sectional Dependence and Problems in Inference in Market-based Accounting Research." Journal of Accounting Research 25, 1-48.
17. Bernard, V. and J. Thomas. (1990). "Evidence that Stock Prices Do Not Fully Reflect the Implications of Current Earnings for Future Earnings." Journal of Accounting and Economics 13, 305-340.
18. 2 in Accounting Research: Measuring Changes in Value Relevance Over the Last Four Decades." Journal of Accounting and Economics 28, 83-115.
19. Canadian Institute of Chartered Accountants. (1995). Performance Measures in the New Economy. Toronto, Canada: CICA.
20. Chandra U., A. Procassini and G. Waymire. (1999). "The Use of Trade Association Disclosures by Investors and Analysts: Evidence from the Semiconductor Industry." Contemporary Accounting Research 16, 643-670.
21. Collins, D. W., E. L. Maydew and I. S. Weiss. (1997). "Changes in the Value-relevance of Earnings and Book Values over the Past Forty Years." Journal of Accounting and Economics 24, 39-67
22. Core, J., W. Guay and A. VanBuskirk. (2003). "Market Valuations in the New Economy: An Investigation of What Has Changed." Journal of Accounting and Economics 34, 43-67.
23. D'Avolio, G., E. Gildor and A. Shleifer. (2001). "Technology, Information Production, and Market Efficiency." Working paper, Harvard Institute of Economic Research.
24. Damodaran, A. (2001). The Dark Side of Valuation: Valuing Old Tech, New Tech and New Economy Companies. New Jersey: Financial Times Prentice Hall.
25. Demers, E. and B. Lev. (2000). "A Rude Awakening: Internet Value Drivers in 2000." Review of Accounting Studies 6, 331-359.
26. Deng, Z, B. Lev and F. Narin. (1999). "Science and Technology as Predictors of Stock Performance." Financial Analysts Journal 55, 20-32.
27. Doukas, J. A., C. Kim and C. Pantzalis. (2002). "A Test of the Errors-in-Expectations Explanation of the Value/Glamour Stock Returns Performance: Evidence from Analysts' Forecasts." The Journal of Finance 57, 2143-2165.
28. Eccles, R. G., R. H. Herz, M. Keegan and D. M. H. Phillips. (2001). The Value Reporting Revolution: Moving Beyond the Earnings Game. New York: John Wiley & Sons.
29. Elgers, P. T., M. H. Lo and R. J. Pfeiffer. (2001). "Delayed Security Price Adjustments to Financial Analysts' Forecasts of Annual Earnings." The Accounting Review 76, 613-632.
30. Fama, E. and K. French. (1992). "The Cross-section of Expected Returns." Journal of Finance 47, 427-466.
31. Fama, E. and J. Macbeth. (1973). "Risk, Return and Equilibrium: Empirical Tests." Journal of Political Economy 71, 607-636.
32. Financial Accounting Standards Board. (2001). Business and Financial Reporting: Challenges from the New Economy. New York: FASB.
33. Foster, G., C. Olsen and T. Shevlin. (1984). "Earnings Releases, Anomalies, and the Behavior of Security Returns." The Accounting Review 59, 574-604.
34. Francis J. and K. Schipper. (1999). "Have Financial Statements Lost Their Relevance?" Journal of Accounting Research 37, 319-352.
35. Francis, J., K. Schipper and L. Vincent. (2003). "The Relative and Incremental Information Content of Alternative (to Earnings) Performance Measures." Contemporary Accounting Research 20, 121-164.
36. Freeman, R., J. Ohlson and S. Penman. (1982). "Book Rate-of-Return and Prediction of Earnings Changes: An Empirical Investigation." Journal of Accounting Research 20, 3-42.
37. Hribar, P. and D. W. Collins. (2002). "Errors in Estimating Accruals: Implications for Empirical Research." Journal of Accounting Research 40, 105-134.
38. Institute of Chartered Accountants in England and Wales. (2000). New Measures for the New Economy. London: ICAEW.
39. Ittner, C. and D. Larcker. (1998a). "Are Nonfinancial Measures Leading Indicators of Financial Performance? An Analysis of Customer Satisfaction." Journal of Accounting Research 36, 1-36.
40. Ittner, C. and D. Larcker. (1998b). "Innovations in Performance Measurement: Trends and Research Implications." Journal of Management Accounting Research 10, 205-238.
41. Kaplan, R. and D. Norton. (1996). The Balanced Scorecard. Boston: Harvard Business Press.
42. Klein, A. (1990). "A Direct Test of the Cognitive Bias Theory of Share Price Reversals." Journal of Accounting and Economics 13, 155-166.
43. Kothari, S. P. (2001). "Capital Markets Research in Accounting." Journal of Accounting and Economics 31, 105-231.
44. Kraft, A., A. Leone and C. Wasley. (2001). "On the Use of Mishkin's Rational Expectations Approach to Testing Efficient-Markets Hypotheses in Accounting Research." Working paper, University of Rochester.
45. Lakonishok, J., A. Shleifer and R. W. Vishny. (1994). "Contrarian Investments, Extrapolation, and Risk." The Journal of Finance, 49, 1541-1578.
46. Landsman, W. and E. Maydew. (2002). "Has the Information Content of Quarterly Earnings Announcements Declined in the Past Three Decades?" Journal of Accounting Research 40, 797-808.
47. La Porta, R., J. Lakonishok, A. Shleifer and R. W. Vishny. (1997). "Good News for Value Stocks: Further Evidence on Market Efficiency." The Journal of Finance 50, 1715-1742.
48. Lev, B. (2001). Intangibles: Management, Measurement, and Reporting. Washington, D.C.: Brookings Institution Press.
49. Lev, B. and S. R. Thiagarajan. (1993). "Fundamental Information Analysis." Journal of Accounting Research 31, 190-215.
50. Lev, B. and P. Zarowin. (1999). "The Boundaries of Financial Reporting and How to Extend Them." Journal of Accounting Research 37, 353-385.
51. Liu, C., J. Livnat and S. G. Ryan. (1996). "Forward-looking Financial Information: The Order Backlog as a Predictor of Future Sales." The Journal of Financial Statement Analysis (Fall), 89-99.
52. Mendenhall, R. (1991). "Evidence on the Possible Underweighting of Earnings-Related Information." Journal of Accounting Research 29, 170-179.
53. Mishkin, F. (1983). A Rational Expectations Approach to Macroeconometrics: Testing Policy Ineffectiveness and Efficient-Markets Models. Chicago: University of Chicago Press.
54. Previts, G., R. Bricker, T. Robinson and S. Young. (1994). "A Content Analysis of Sell-Side Financial Analyst Company Reports." Accounting Horizons 8, 55-70.
55. Rajgopal, S., M. Venkatachalam and S. Kotha. (2002). "Managerial Actions, Stock Returns and Accounting Earnings: The Case of Business-to-Business Internet Firms." Journal of Accounting Research 40, 529-556.
56. Rajgopal, S., M. Venkatachalam and S. Kotha. (2003). "The Value Relevance of Network Advantages: The Case of E-commerce Firms." Journal of Accounting Research 41, 135-162.
57. Securities and Exchange Commisson, Division of Corporation Finance. (2001). Current Accounting and Disclosure Issues. Washington, D.C.: SEC.
58. Shevlin, T. and D. Shores. (1993). "Firm Size, Security Returns, and Unexpected Earnings: The Anomalous Signed-size Effect." Contemporary Accounting Research 10, 1-30.
59. Sloan, R. G. (1996). "Do Stock Prices Fully Reflect Information in Accruals and Cash Flows About Future Earnings?" The Accounting Review 71, 1-27.
60. Soffer, L. C. and T. Lys. (1999). "Post-earnings Announcement Drift and the Dissemination of Predictable Information." Contemporary Accounting Research 16, 305-331.
61. Trueman, B., F. Wong and X. Zhang. (2001). "The Eyeballs Have It: Searching for the Value in Internet Stocks." Journal of Accounting Research 38, 137-162.
62. Wahlen, J. M. (2001). "Discussion of 'Do Stock Prices of Property Casualty Insurers Fully Reflect Information About Earnings, Accruals, Cash Flow and Development?" Review of Accounting Studies 6, 221-228.
63. Walther, B. (1997). "Investor Sophistication and the Market's Earnings Expectations." Journal of Accounting Research 35, 157-192.
64. Xie, H. (2001). "Are Discretionary Accruals Mispriced? A Reexamination." The Accounting Review 76, 357-373.