University of SaskatchewanHARVEST
  • Login
  • Submit Your Work
  • About
    • About HARVEST
    • Guidelines
    • Browse
      • All of HARVEST
      • Communities & Collections
      • By Issue Date
      • Authors
      • Titles
      • Subjects
      • This Collection
      • By Issue Date
      • Authors
      • Titles
      • Subjects
    • My Account
      • Login
      JavaScript is disabled for your browser. Some features of this site may not work without it.
      View Item 
      • HARVEST
      • Electronic Theses and Dissertations
      • Graduate Theses and Dissertations
      • View Item
      • HARVEST
      • Electronic Theses and Dissertations
      • Graduate Theses and Dissertations
      • View Item

      Essays on the value relevance of earnings measures

      Thumbnail
      View/Open
      ChimaPhDDissertation.pdf (578.2Kb)
      Date
      2007-09-11
      Author
      Mbagwu, Chima I
      Type
      Thesis
      Degree Level
      Doctoral
      Metadata
      Show full item record
      Abstract
      This dissertation presents two studies on the value relevance and perceived credibility of pro forma earnings. In the first study, I investigate the value relevance of pro forma earnings relative to two alternative earnings measures – GAAP earnings and analysts’ actual earnings. Value relevance is assessed using two approaches. The first approach examines whether the market’s expectations (contemporaneous returns or price) is best reflected in future pro forma earnings, future GAAP earnings, or future analyst’s actual earnings. The second approach is to determine through pair-wise comparisons of the three earnings measures (e.g., pro forma earnings versus GAAP earnings), which has the greatest explanatory power (comparing adjusted R2s) in explaining price and returns. Across approaches and models, each of the three earnings measures tends to be value relevant. However, Pro forma is consistently the most value relevant, followed by analysts’ actuals, with GAAP earnings having the least value relevance. That is, pro forma earnings have the greatest information content. This finding is consistent with managers, in aggregate, using pro forma to inform rather than to manage expectations or to mislead. In the second study, I examine the impact of credibility attributes – board characteristics, auditor quality and overall information quality – on the value relevance of pro forma earnings. It is hypothesized that the credibility attributes will have a statistically significant impact on investors’ reaction to pro forma earnings. Consistent with the predictions, I find that stronger board characteristics, higher auditor quality and higher overall information quality are positively associated with higher market reaction to the pro forma announcement. That is, credibility attributes increase the value relevance of pro forma earnings. This finding is consistent with some firms providing pro forma earnings that are perceived to be credible and others providing pro formas that are perceived as less credible and possibly provided to manage expectations or to mislead.
      Degree
      Doctor of Philosophy (Ph.D.)
      Department
      Accounting
      Program
      Accounting
      Committee
      Vaidyanathan, Ganesh; Isaac, Grant E.; Fulton, Murray E.; Feltham, Glenn; Entwistle, Gary
      Copyright Date
      September 2007
      URI
      http://hdl.handle.net/10388/etd-09102007-125536
      Subject
      credibility
      corporate governance
      earnings
      Voluntary disclosure
      pro forma
      value relevance
      Collections
      • Graduate Theses and Dissertations
      University of Saskatchewan

      University Library

      The University of Saskatchewan's main campus is situated on Treaty 6 Territory and the Homeland of the Métis.

      © University of Saskatchewan
      Contact Us | Disclaimer | Privacy