财务会计理论The Information Approach推荐.ppt

Chapter 5 The Information Approach * Chapter Overview Fundamentals of Information Approach (IA) What is information approach? Why do markets react to accounting information? How to capture market reaction? Contribution of IA-based research Criticism to IA-based research More in-depth discussion Conclusion * Information Approach – Introduction From EMH (Ch4) to Information Approach (Ch5) Ch4: Market reacts to information; accounting information competes with other information Ch5: Whether market reacts to accounting information? If so, what accounting information should be provided? From Information Approach (Ch5) to Measurement Approach (Ch6) Ch6: Information approach assumes market efficiency; however, market does not always work efficiently * Information Approach – Introduction (Cont’d) Information Approach Originated from the classic study in 1968 (Ball and Brown) Dominated accounting research for decades till recently Explores relationship between acct information (financial reporting) and market efficiency Assume market efficiency * Why Do Markets React to Accounting Information? Investors have prior probabilities of future firm performance - Investors obtain useful information from financial reports - Investors revise their probabilities - Leads to buy/sell decisions - Security price changes - Investors’ Return on security changes * How to Capture Price Reaction to Accounting Information? Changes of trading volume Abnormal return CAPM model, etc. Event study Price and trading volume change before and after the event The change window: 1-day, 3-day, 5-day window Think: why not 1-quarter, 1-year window? * Estimation of Abnormal Return Abnormal return = Actual return – expected return Actual return: (P1-P0)/P0 Expected return: Regression analysis using market models (e.g. CAPM model, Fama-French model) * Earnings Response Coefficients (ERC) Key questions asked under information approach 1. Whether market reacts to unexpected earnings? 2. If yes, does t