Gregory B. Waymire

Voluntary Disclosure Choice And Earnings Information-Transfer

The purpose of this paper is to assess the relation between the incidence of earnings information transfer and managerial decisions to disclose earnings forecasts. We investigate whether forecasting firms receive lower magnitude earnings information transfers than nonforecasting firms. Previous studies suggest that annual earnings are not a timely disclosure medium (e.g., Ball and Brown [1968]) and that interim disclosures like quarterly announcements and management forecasts have information content for prices.1 Other studies document the existence of intraindustry information transfers associated with quarterly earnings2 and management forecasts.3 Collectively, this evidence suggests that investors condition their beliefs about a firms earnings prospects on

The Information-Content Of Earnings In A Discretionary Reporting Environment - Evidence From Nyse Industrials, 1905-10

This paper provides evidence on stock price behavior associated with annual earnings reports by 51 industrial corporations traded on the New York Stock Exchange (NYSE) during 1905-10. These firms were subject to virtually no government-imposed disclosure requirements (see Hawkins [1963]) and only minimal exchange requirements. While NYSE-listed firms were required to disclose annual earnings, there were no restrictions on accounting methods and no audit requirements. Moreover, these requirements could be avoided if the shares were traded on the NYSE as unlisted securities.1 In addition, the accounting and auditing technologies of this era were rudimentary (see Edwards [1960] and Previts and Merino [1979]). There were no external accounting and auditing guidelines and external audits were far

Has the Importance of Intangibles Really Grown? And if so, Why?

Abstract Intangibles are ideas or knowledge about the natural (physical and biological) and socio‐cultural worlds that enable people to better accomplish their goals, both in primitive societies and in modern economies. Intangibles include basic research and technology improvements, as well as knowledge to better organise exchange and production, and over time become inextricably embedded in improved tangible assets. Accounting intangibles are legally excludable subsets of economic intangibles, which in turn are the subsets of cultural intangibles that can be used to create tradable goods or services. Because economic intangibles are cumulative, synergistic, and frequently inseparable from other tangible assets and/or economic intangibles not owned by any single entity, it is usually futile to estimate a separate accounting value for individual intangibles. However, the income that intangibles together generate provides useful inputs for equity valuation, and voluntary non‐financial disclosures could be informative for this purpose.

Recordkeeping Alters Economic History by Promoting Reciprocity

We experimentally demonstrate a causal link between recordkeeping and reciprocal exchange. Recordkeeping improves memory of past interactions in a complex exchange environment, which promotes reputation formation and decision coordination. Economies with recordkeeping exhibit a beneficially altered economic history where the risks of exchanging with strangers are substantially lessened. Our findings are consistent with prior assertions that complex and extensive reciprocity requires sophisticated memory to store information on past transactions. We offer insights on this research by scientifically demonstrating that reciprocity can be facilitated by information storage external to the brain. This is consistent with the archaeological record, which suggests that prehistoric transaction records and the invention of writing for recordkeeping were linked to increased complexity in human interaction.

Memory, Transaction Records, and The Wealth of Nations

Adam Smith hypothesized that impersonal exchange was necessary for a society to develop specialized division of labor and create wealth. Douglass North and Vernon Smith argue that successful developed economies are the result of institutions. We hypothesize and provide evidence from ethnographic data that the basic accounting technology of recording transactions is associated with more extensive impersonal exchange and increased specialization in the division of labor. Our intuition is that extensive impersonal exchange requires reliable memory of trading partners’ past behavior to sustain trust and encourage reciprocity when a group expands beyond the size of traditional hunter-gatherer groups. Our findings are consistent with the hypothesis that transaction records are necessary for the emergence of complex economies as suggested by the archaeological evidence of recordkeeping in Mesopotamian societies 10,000 years ago.

Accuracy of Exchange Valuation Rules: Additivity and Unbiased Estimation

No issue has been the subject of greater debate among both practicing and academic accountants than asset valuation (and hence income measurement). The debate on this issue has been going on for over 50 years (e.g., Paton [1922] and Canning [1929]) and, at times, at a high level of intensity. The primary issue is whether historical cost of assets should be adjusted for price changes and, if so, how. Following Ijiris [1967; 1968] characterization of valuation rules as linear aggregation functions. Sunder [1978] developed a scheme of algebraic representation of valuation rules (e.g., historical cost, general price-level-adjusted, current value, etc.) as a function ofthe set of price indexes used to adjust the historical data. A mean-squared difference between current and an estimated value of baskets of assets summarizes the ability of various valuation rules to approximate current value. This mean-squared difference is an inverse measure of accuracy of valuation rules, and some of its mathematical properties were derived by Sunder [1978]. In this paper we first derive additivity as another important mathematical property of the accuracy of valuation rules and then present an unbiased statistical estimator of accuracy. These analytical results enable us to conduct empirical estimations of accuracy of valuation rules using the Producer Price Index data base in Sunder and Waymire [1983]. The analytical framework and previous results are summarized in section 1. Definition and proof of the additivity property of accuracy are

Who Gets Swindled in Ponzi Schemes

Extant knowledge of Ponzi schemes in the accounting and finance literature is mainly anecdotal. The consequence of this is that it is difficult to know what, if anything, can be done to deter these frauds. We seek to fill part of our knowledge gap about Ponzi schemes by providing large-scale evidence based on a sample of 376 Ponzi schemes prosecuted by the SEC between 1988 and 2012. Our evidence indicates that the majority of SEC-prosecuted schemes involve sums that are much lower than those in the highly visible frauds perpetrated by Bernard Madoff and Allen Stanford. The mean duration of Ponzi schemes in our sample is about four years and these schemes have a mean (median) average per-investor investment of around

Disclosure Policies and Shareholder Wealth in the Early Twentieth Century: The Case of the American Sugar Refining Company:

431,700 (

Neuroaccounting, Part II: Consilience Between Accounting Principles and the Primate Brain

87,800). Ponzi schemes are more likely to occur in U.S. states where the citizenry is inherently more trusting. The ex post success of a Ponzi scheme (as measured by duration, total amount invested, or the percentage cut to perpetrators) tends to be greater when an affinity link is present, the elderly are targeted, and whether the perpetrator provides financial incentives to third-parties to recruit victims into the scheme.

Neuroaccounting, Part I: The Primate Brain and Reciprocal Exchange

In this paper we provide evidence on the relation between the adoption of corporate disclosure policies and shareholder wealth using early twentieth-century data. Ample evidence suggests that accounting reports have information content, but little direct evidence on the wealth effects of reporting policies is available.’ Theoretical research suggests that disclosure policies can have favorable wealth effects via reduction of agency and stock market transaction costs, assuming such benefits exceed the cost of proprietary information release and other disclosure costs (see Watts and Zimmerman [1986] and Easterbrook and Fischel [1984], among others).’ However, providing direct evidence on the wealth effects of disclosure policies is difficult with modern data because publicly traded U.S. firms are subject to extensive disclosure requirements under federal law. The focus of our investigation is the shareholder wealth effects of the decision by the American Sugar Refining Company (ASR) to reverse a long-standing secrecy policy. ASR’s president, Henry Havemeyer, was an outspoken critic of corporate publicity, and as a result, the company did not issue its first voluntary annual report until nearly three months after his dcath. In January 1908, ASR reversed its secrecy policy and committed to a policy of disclosing annual rcports. The company’s first annual report was subsequently released in March 1908.