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To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1475-679X.2010.00385.x Byline: HANWEN CHEN (*), JEFF ZEYUN CHEN ([dagger]), GERALD J. LOBO ([double dagger]), YANYAN WANG (*) Abstract: ABSTRACT We examine the association between borrower (firm) and lender (bank) state ownership and accounting conservatism for a sample of Chinese firms. We hypothesize that state-owned enterprises (SOEs) adopt less conservative accounting than non-state-owned enterprises (NSOEs) because lenders are less concerned with downside risk for SOEs than for NSOEs. We also hypothesize a negative relation between conservatism and the fraction of total loans a firm borrows from state-owned banks (SBs) because SBs have weaker demand for assurance of sufficient net assets to cover loan repayments than non-state-owned banks (NSBs). We find support for both hypotheses. Further analyses reveal that: (1) firms that borrow from commercial SBs exhibit more conservative accounting than firms that borrow from policy SBs and (2) firms adopt more conservative accounting as they get more loans from banks with foreign ownership or exclusively foreign banks. However, the results of these additional analyses are to some extent sensitive to alternative measures of accounting conservatism. Author Affiliation: (*)Xiamen University ([dagger])University of Colorado at Boulder ([double dagger])University of Houston. Article History: Received 11 November 2009; accepted 06 July 2010

A study analyzing the stock price spreads and depths around the time of quarterly earnings announcements is presented. The study also examines the relationship between the said equity ask spreads and depths, and properties of analysts' forecasts.

An investigation of whether bank managers use their discretion in estimating loan loss provisions (LLP) to convey information about their banks' future prospects is conducted. It is hypothesized that the propensity to signal varies negatively with bank size and positively with variability, future investment opportunities, and degree of income smoothing.

Byline: Kiridaran Kanagaretnam (1), Gerald J. Lobo (2), Robert Mathieu (3) Keywords: income smoothing; loan loss provision; job security Abstract: We examine alternative underlying motives of bank managers in using loan loss provisions (LLP) to smooth reported income. Based on the analytical results of Fudenberg and Tirole (1995), we predict that for banks with good (poor) current performance and expected poor (good) future performance, managers will save income for (borrow income from) the future by reducing (increasing) current income through LLP. We also analyze three additional variables that could explain cross-sectional differences in the level of income smoothing. Our empirical analysis provides support for our predictions. The difference in LLP between the two groups of banks is positive as hypothesized, indicating that bank managers do save earnings through LLP in good times and borrow earnings using LLP in bad times. Similar results are obtained for analysis using discretionary LLP. When bank managers are saving earnings for the future, we provide evidence that the need to obtain external financing is an important additional variable in explaining cross-sectional differences in the extent of income smoothing. Furthermore, whether or not a bank is well capitalized is also weakly significant in explaining cross-sectional differences in income smoothing. Author Affiliation: (1) Michael G. DeGroote School of Business, McMaster University, Hamilton, Ontario, Canada, L8S 4M4 (2) School of Management, Syracuse University, Syracuse, NY, 13244-2130, U.S.A. (3) School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario, Canada, N2L 3C5 Article History: Registration Date: 04/10/2004

Byline: Thomas J. Vogel (1), Gerald J. Lobo (2) Keywords: executive compensation; performance plans; capital expenditures Abstract: Prior research demonstrates that firms adopting long-term performance plans experience increased capital investment, earnings, and risk in the post-adoption period. However, these results are subject to distortions that may result from exogenous factors over the long time period examined. To avoid these potential distortions we examine financial analysts' forecasts in the periods immediately preceding and following the adoption of the performance plan. We find that projected long-term capital expenditures per share, earnings per share and cash flow per share are revised upward in the post-adoption period. These results are consistent with the premise that the adoption of long-term performance plans is expected to favorably affect managers' decisions. In addition, we find that the revisions are primarily attributable to firms that were performing poorly in the period prior to plan adoption and in greatest need of change. This finding has not been documented in previous studies. Author Affiliation: (1) Western New England College, 1215 Wilbraham Road, Springfield, MA, 01119-2684 (2) School of Management, Syracuse University, Syracuse, NY, 13244-2130 Article History: Registration Date: 13/10/2004

Byline: Gerald J. Lobo (1), Dong-Hoon Yang (2) Keywords: capital management; loan loss provision; income smoothing; signaling Abstract: This study examines bank managers' three major motivations for discretionary behavior with respect to loan loss provisions: signaling, income smoothing, and capital management. To do so, it utilizes a bank-specific time-series regression approach that captures heterogeneity in the banks' priorities and strategies for alternative motives and compares the results to those from alternative model specifications. The statistical tests and results presented in this study lead to three conclusions. First, significant results for the income smoothing hypothesis are robust to the various model specifications. Second, average signaling coefficients estimated from bank-specific regressions are systematically larger than corresponding coefficients from pooled time-series cross-sectional regressions and are statistically significant. Finally, bank managers appear to use loan loss provisions to manage their regulatory capital levels by comparing them with the minimum ratios specified by regulators rather than with a time-series bank-specific ratio or pooled time-series cross-sectional mean ratio. Author Affiliation: (1) School of Management, Syracuse University, Syracuse, NY, 13244-2130, U.S.A. (2) School of Business, Information and Communications University (ICU), P.O. Box 77, Yusong, Taejon, 305-600, Korea Article History: Registration Date: 03/10/2004

Byline: Gerald J. Lobo (1), Samuel S. Tung (2) Keywords: analysts' earnings forecast dispersion; stock price variability; quarterly earnings announcements; forecast precision Abstract: This study investigates the relationship between the dispersion of analysts' earnings forecasts and stock price variability around quarterly earnings announcements. Consistent with theoretical predictions, the empirical analysis shows that stock price variability at the time of earnings announcements is positively related to the degree of analysts' predisclosure earnings forecast dispersion. Additionally, firms with high levels of forecast dispersion exhibit significant increases in price variability for longer periods prior to and following earnings announcements than do firms with low levels of forecast dispersion. These results suggest that there is information about the earnings announcement that becomes available to at least a subset of investors prior to the earnings release and that market participants take different amounts of time to process the information conveyed by the earnings announcement. Author Affiliation: (1) Syracuse University, USA (2) Hong Kong Baptist University, Hong Kong Article History: Registration Date: 08/10/2004

The economic consequences of Statement of Financial Accounting Standards (SFAS) No. 14 segment disclosures were examined. It was proposed that stock price variability is larger at the time of release of these reports. It was also suggested that stock analysts' income predictions are more accurate after the issuance of reports. Empirical investigations confirmed both hypotheses. SFAS No. 14 segment reports transmit incremental data over previously announced SEC line-of-business information that is important to shareholders and stock analysts.

A study has been conducted to examine the trading volume reaction associated with quarterly earnings announcements and the effect of predisclosure information asymmetry on trading volume. Results show that trading volume response to quarterly earning announcements is positively related to the level of predisclosure information asymmetry and to the magnitude of the price reaction to the announcements. Results also provide evidence on the relation of predisclosure information asymmetry and trading volume before and after quarterly earnings announcements.

Predicting corporate income is important to financial decision-making and much has been written about the best way to forecast earnings. Previous research shows that financial analysts' forecasts are better than those based on statistical models. However, the effect of combining analysts' and statistical model forecasts was not considered. To test the effect of combined forecasts, analysts' forecasts, univariate time series models and a combination of the two were evaluated. Results support earlier findings that analysts' forecasts are more accurate than time series models. However, combined forecasts are a significant improvement over analysts' forecasts.

The relationship between the amount of information available about a firm before annual meetings and the stock return variability at annual earnings announcements is examined. The number of securities analysts' annual earnings forecasts and the market value of the firm's common equity are used to measure the amount of prior information available. Data was collected from 348 firms listed in the Institutional Brokers Estimate System database using December 31, 1980 fiscal year-ends and 400 firms with December 31, 1981 year-ends. Results indicate an inverse relationship between the measures of the amount of prior information and security return variability around annual earnings announcements.

The links between reported value of intangible assets, associated amortization costs and firms' equity market values are examined.