The psychological attraction approach to accounting and disclosure policy

Contemporary Accounting Research

Volumn 26, Issue 4, 2009, Pages 1067-1090

  Hirshleifer, David ^a   Teoh, Siew Hong ^a  

^a UNIVERSITY OF CALIFORNIA   (United States)

Author keywords

Accounting regulation and disclosure; Behavioral accounting and finance; Investor psychology; Market efficiency

Indexed keywords

EID: 76249132902     PISSN: 08239150     EISSN: 19113846     Source Type: Journal    
DOI: 10.1506/car.26.4.3     Document Type: Article

References (82)

1. Ball, R., S. P. Kothari, and A. Robin. 2000. The effect of international institutional factors on properties of accounting earnings. Journal of Accounting and Economics 29: 1-51.
2. Bandyopadhyay, S., C. Chen, A. G. Huang, and R. Jha. 2008. Accounting conservatism and the trade-off between relevance and reliability of current earnings. Paper presented at the 23rd Contemporary Accounting Research Conference, Québec City.
3. Barberis, N., M. Huang, and T. Santos. 2001. Prospect theory and asset prices. Quarterly Journal of Economics 116(1):1-53.
4. Barrett, J. L. 2000. Exploring the natural foundations of religion. Trends in Cognitive Sciences 4(3):29-34.
5. Baumeister, R. F., E. Bratslavsky, C. Finkenauer, and K. D. Vohs. 2001. Bad is stronger than good. Review of General Psychology 5(4):323-70.
6. Black, F. 1993. Choosing accounting rules. Accounting Horizons 7 (4) : 1-17.
7. Boyer, P. 2001. Religion explained: Evolutionary origins of religious thought. New York: Basic Books.
8. Buijink, W., R. Cuijpers, and E. Peek. 2008. Creditors' and shareholders' reporting demands in public versus private firms: Evidence from Europe. Paper presented at the 23rd Contemporary Accounting Research Conference, Québec City.
9. Camerer, C., T.-H. Ho, and J.-K. Chong. 2004. A cognitive hierarchy model of games. Quarterly Journal of Economics 119(3):861-98.
10. Camerer, C., S. Issacharoff, G. Loewenstein, T. O'Donoghue, and M. Rabin. 2003. Regulation for conservatives: Behavioral economics and the case for "asymmetric paternalism". University of Pennsylvania Law Review 1151(3):1211-54.
11. Caplan, B. 2001. Rational ignorance versus rational irrationality. Kyklos 54(1):3-26.
12. Chen, S., D. Matsumoto, and S. Rajgopal. 2008. Is silence golden? An empirical analysis of firms that stop giving quarterly earnings guidance. Working paper, University of Washington.
13. Christensen, J., and J. Demski. 2004. Asymmetric monitoring: Good versus bad news verification. Schmalenbach Business Review 56(3):206-22.
14. Christensen, P., J. Demski, and H. Frimor. 2002. Accounting policies in agencies with moral hazard and renegotiation. Journal of Accounting Research 40(4):1071-90.
15. Daniel, K., D. Hirshleifer, and A. Subrahmanyam. 1998. Investor psychology and security market under-and overreactions. The Journal of Finance 53(6):1839-85.
16. Daniel, K., D. Hirshleifer, and S. H. Teoh. 2002. Investor psychology in capital markets: Evidence and policy implications. Journal of Monetary Economics 49(1):139-209.
17. DeGeorge, F., J. Patel, and R. Zeckhauser. 1999. Earnings management to exceed thresholds. Journal of Business 72(1):1-33.
18. Delia Vigna, S., and J. Pollet. 2009. Investor inattention and Friday earnings announcements. The Journal of Finance 64(2):709-49.
19. De Long, J. B., A. Shleifer, L. H. Summers, and R. J. Waldmann. 1990. Noise trader risk in financial markets. Journal of Political Economy 98(4):703-38.
20. Dietrich, J. R., S. J. Kachelmeier, D. Kleinmuntz, and T. Linsmeier. 2001. Market efficiency, bounded rationality, and supplemental business reporting disclosures. Journal of Accounting Research 39(2):243-68.
21. Drake, M., J. Myers, and L. Myers. 2008. Disclosure quality and the mispricing of accruals and cash flow. Working paper, University of Arkansas. http://ssrn.com/abstract=985949.
22. Edmans, A., D. García, and Ø. Norli. 2007. Sports sentiment and stock returns. The Journal of Finance 62(4):1967-98.
23. Financial Accounting Standards Board (FASB). 1994. Statement of Financial Accounting Standards No. 119: Disclosure about derivative financial instruments and fair value of financial instruments. Stamford, CT: FASB.
24. Financial Accounting Standards Board (FASB). 2008a. Discussion Paper No. 1630-100: Preliminary views on financial statement presentation. October 16. Stamford, CT: FASB.
25. Financial Accounting Standards Board (FASB). 2008b. Staff Position on Statement 140 and Interpretation 46 (R), No. FAS 140-4 and FIN 46 (R) -8: Disclosures by public entities (enterprises) about transfers of financial assets and interests in variable interest entities. Stamford, CT: FASB.
26. Financial Accounting Standards Board (FASB). 2008c. Staff Position No. 157-d: Determining the fair value of a financial asset in a market that is not active. Stamford, CT: FASB.
27. Fitch Ratings. 2008. Fair value disclosures: A reality check. June 26. New York: Fitch Ratings.
28. Gigler, F., C. Kanodia, H. Sapra, and R. Venugopalan. 2009. Accounting conservatism and the efficiency of debt contracts. Journal of Accounting Research 47(3):767-97.
29. Glover, J., Y. Ijiri, C. Levine, and P. Liang. 2005. Separating facts from forecasts in financial statements. Accounting Horizons 19(4):267-82.
30. Graham, J., C. Harvey, and S. Rajgopal. 2005. The economic implications of corporate financial reporting. Journal of Accounting and Economics 40(1-3):3-73.
31. Hayek, F. 1988. The fatal conceit: The errors of socialism. Chicago: University of Chicago Press.
32. Healy, P. M., and J. M. Wahlen. 1999. A review of the earnings management literature and its implications for standard setting. Accounting Horizons 13(4):365-83.
33. Heath, C., and A. Tversky. 1991. Preference and belief: Ambiguity and competence in choice under uncertainty. Journal of Risk and Uncertainty 4(1):5-28.
34. Hirshleifer, D. 2001. Investor psychology and asset pricing. The Journal of Finance 56(4):1533-98.
35. Hirshleifer, D. 2008. Psychological bias as a driver of financial regulation. European Financial Management 14(5):856-74.
36. Hirshleifer, D., K. Hou, S. H. Teoh, and Y. Zhang. 2004. Do investors overvalue firms with bloated balance sheets? Journal of Accounting and Economics 38(1-3):297-331.
37. Hirshleifer, D., S. Lim, and S. H. Teoh. 2009. Driven to distraction: Extraneous events and underreaction to earnings news. The Journal of Finance 64(5):2287-323.
38. Hirshleifer, D., and T. Shumway. 2003. Good day sunshine: Stock returns and the weather. The Journal of Finance 58(3):1009-32.
39. Hirshleifer, D., and S. H. Teoh. 2003. Limited attention, information disclosure, and financial reporting. Journal of Accounting and Economics 36(1-3):337-86.
40. Hodder, L., L. Koonce, and M. McAnally. 2001. SEC market risk disclosures: Implications for judgment and decision making. Accounting Horizons 15(1):49-70.
41. Holthausen, R., and R. Watts. 2001. The relevance of the value-relevance literature for financial accounting standard setting. Journal of Accounting and Economics 31(1-3):3-75.
42. Ijiri, Y. 1975. Theory of accounting measurement: Studies in accounting research. Sarasota, FL: American Accounting Association.
43. Indjejikian, R., and D. J. Nanda. 1999. Dynamic incentives and responsibility accounting. Journal of Accounting and Economics 27(2):177-201.
44. Jensen, M. 1986. Agency cost of free cash flow, corporate finance, and takeovers. American Economic Review 76(2):323-9.
45. Kachelmeier, S., and R. King. 2002. Using laboratory experiments to evaluate accounting policy issues. Accounting Horizons 16(3):219-32.
46. Kahneman, D., and A. Tversky. 1979. Prospect theory: An analysis of decision under risk. Econometrica 47(2):263-91.
47. Koh, K., D. Matsumoto, and S. Rajgopal. 2008. Meeting or beating analyst expectations in the post-scandals world: Changes in stock market rewards and managerial actions. Working paper, University of Washington.
48. Koonce, L., M. Lipe, and M. McAnally. 2005. Judging the risk of financial instruments: Problems and potential remedies. The Accounting Review 80(3):871-95.
49. Koonce, L., M. McAnally, and M. Mercer. 2005. How do investors judge the risk of financial and derivative instruments? The Accounting Review 80(1):221-41.
50. Laibson, D. 1997. Golden eggs and hyperbolic discounting. Quarterly Journal of Economics 112(2):443-77.
51. Lev, B. 1968. The aggregation problem in financial statements: An informational approach. Journal of Accounting Research 6(2):247-61.
52. Libby, R., R. Bloomfield, and M. W. Nelson. 2002. Experimental research in financial accounting. Accounting, Organizations and Society 27(8):775-810.
53. Lim, S. 2006. Do investors integrate losses and segregate gains? Mental accounting and investor trading decisions. Journal of Business 79(5):2539-73.
54. Loewenstein, G., E. Weber, C. Hsee, and E. Welch. 2001. Risk as feelings. Psychological Bulletin 127(2):267-86.
55. Loughran, T., and J. Ritter. 1997. The operating performance of firms conducting seasoned equity offerings. The Journal of Finance 52(5):1823-50.
56. Maines, L. A., and L. S. McDaniel. 2000. Effects of comprehensive-income characteristics on nonprofessional investors' judgments: The role of financial-statement presentation format. The Accounting Review 75(2):179-207.
57. Mashruwala, C., S. Rajgopal, and T. Shevlin. 2006. Why is the accrual anomaly not arbitraged away? The role of idiosyncratic risk and transaction costs. Journal of Accounting and Economics 42(1-2):3-33.
58. McConnell, J., and C. Muscarella. 1985. Corporate capital expenditure decisions and the market value of the firm. Journal of Financial Economics 14(3):399-422.
59. McKay, B., and K. Brown. 2002. Coke to abandon forecasts to focus on long-term goals. Wall Street Journal, December 16. http://www.wsj.com.
60. Oliver, B. L. 1972. A study of confidence interval financial statements. Journal of Accounting Research 10(1):154-66.
61. Olsen, R. 1997. Investment risk: The experts' perspective. Financial Analysts Journal 53(2):62-6.
62. Pincus, M., S. Rajgopal, M. Venkatachalam. 2007. The accrual anomaly: International evidence. The Accounting Review 82(1):169-203.
63. PricewaterhouseCoopers. 2008. Accounting for change: Transparency in the midst of turmoil - A survey of banks' 2007 annual reports. August. http://www.pwc.com/gx/en/research-insights/index.jhtml.
64. Richardson, S., S. H. Teoh, and P. Wysocki. 2004. The walk-down to beatable analyst forecasts: The role of equity issuance and insider trading incentives. Contemporary Accounting Research 21(4):885-924.
65. Ritov, I., and J. Baron. 1990. Reluctance to vaccinate: Omission bias and ambiguity. Journal of Behavioral Decision Making 3(4):263-77.
66. Rountree, B., J. Weston, and G. Allayannis. 2008. Do investors value smooth performance? Journal of Financial Economics 90(3):237-51.
67. Scheinkman, J., and W. Xiong. 2003. Overconfidence and speculative bubbles. Journal of Political Economy 111(6):1183-219.
68. Securities and Exchange Commission (SEC). 1997. Financial Reporting Release No. 48: Disclosure of accounting policies for derivative financial instruments and derivative commodity instruments and disclosure of quantitative information about market risk inherent in derivative financial instruments, other financial instruments and derivative commodity instruments. Washington, DC: SEC.
69. Skinner, D., and R. Sloan. 2002. Earnings surprises, growth expectations and stock returns or don't let an earnings torpedo sink your portfolio. Review of Accounting Studies 7(2-3):289-312.
70. Sloan, R. 1996. Do stock prices fully reflect information in accruals and cash flows about future earnings? The Accounting Review 71(3):289-315.
71. Sorter, G. 1969. An "events" approach to basic accounting theory. The Accounting Review 44(1):12-9.
72. Sunstein, C., and R. Thaler. 2003. Libertarian paternalism is not an oxymoron. University of Chicago Law Review 70(4):1159-202.
73. Teoh, S. H., I. Welch, and T. J. Wong. 1998a. Earnings management and the long run market performance of the initial public offering. The Journal of Finance 53(6):1935-74.
74. Teoh, S. H., I. Welch, and T. J. Wong. 1998b. Earnings management and the underperformance of seasoned equity offerings. Journal of Financial Economics 50(1):63-99.
75. Teoh, S. H., Y. Yang, and Y. Zhang. 2009. The earnings numbers game: Rewards to walk down and penalties to walk up of analysts' forecasts of earnings. Working paper, University of California, Irvine.
76. Thaler, R. 1985. Mental accounting and consumer choice. Marketing Science 4(3):199-214.
77. Thaler, R., and E. Johnson. 1990. Gambling with the house money and trying to break even: The effects of prior outcomes on risky choice. Management Science 36(6):643-60.
78. Thornburg, S., and R. Roberts. 2008. Accounting, Organizations and Society 33(2-3):229-48.
79. Watts, R. 2003. Conservatism in accounting - Part I: Explanations and implications. Accounting Horizons 17(3):207-21.
80. Watts, R., and J. Zimmerman. 1979. The demand for and supply of accounting theories: The market for excuses. The Accounting Review 54(2):273-305.
81. Waymire, G., and S. Basu. 2008. Accounting is an evolved economic institution. Foundations and Trends in Accounting 2(1-2):1-174.
82. Yates, F., and E. Stone. 1992. The risk construct in risk-taking behavior. In Risk-Taking Behavior, ed. F. Yates, 1-25. New York: Wiley.