payout policy in the 21st century - welcome to q group.pptVIP

Brav/Graham/Harvey/Michaely: Payout Policy The Economic Implications of Corporate Financial Reporting John R. Graham Duke University, Durham, NC USA Campbell R. Harvey Duke University, Durham, NC USA National Bureau of Economic Research, Cambridge, MA USA Shiva Rajgopal University of Washington, Seattle, WA USA Graham/Harvey/Rajgopal: Corporate Reporting Background 1. Graham and Harvey conduct a survey on capital structure and project evaluation “Theory and Practice of Corporate Finance: Evidence from the Field” appears in JFE 2001 2. Brav, Graham, Harvey Michaely survey on dividend and repurchase policy “Payout Policy in the 21st Century” forthcoming in JFE 2004 3. Graham, Harvey and Rajgopal survey on corporate financial reporting Graham/Harvey/Rajgopal: Corporate Reporting Methodology General goals our research program: To examine assumptions To learn what people say they believe To provide a complement to the usual research methods: archival empirical work and theory Graham/Harvey/Rajgopal: Corporate Reporting Methodology Approach contrasts with Friedman’s (1953) “The Methodogy of Positive Economics” Goals of positive science are predictive Don’t reject theory based on “unrealistic assumptions” Also, rejects notion that all the predictions of a theory matter to its validity – goal is “narrow predictive success” Graham/Harvey/Rajgopal: Corporate Reporting Narrow goals Insight on following issues: Importance of reported earnings and earnings benchmarks Are earnings managed? How? Why? Real versus accounting earnings management Does missing consensus indicate deeper problems? Consequences of missing earnings targets Importance of earnings paths Why make voluntary disclosures? Graham/Harvey/Rajgopal: Corporate Reporting Strengths and limitations Strengths: Surveys enable us to ask decision-makers specific qualitative questions about motivations Less of a variable specification problem Complements large sample analyses A unique angle to confro