Thomas R. Dyckman

A Comparison Of Event Study Methodologies Using Daily Stock Returns - A Simulation Approach

Accounting research studies commonly use measures of abnormal security returns to test hypotheses about accounting information and policies. Alternative methods are used in these studies to detect abnormal performance and thereby examine the information content of identified events. The ability of these methods to detect abnormal returns using simulation techniques is examined by Brown and Warner [1980; 1984]. Morse [1984] addresses this issue analytically. The analytical approach presumes that the event study data is generated by the process modeled, while the simulation approach uses the security return data generated by the market. Simulation provides a tractable means of dealing with situations where an analytical approach may yield results suggesting direction but not magnitude or where such techniques are unusually cumbersome. Both limitations face us in this study. Brown and Warner [1980] use monthly data to examine the comparative abilities of several combinations of return-generating models and

2 Decades Of The Journal-Of-Accounting-Research

* Professor, Cornell University; t Professor, Rice University. We wish to thank our colleagues and particularly Professors William H. Beaver and Joel Demski, both of Stanford University, and Robert J. Swieringa, Cornell University, for their careful reading of this long manuscript and the substantive improvements they suggested. The limitations and omissions remain our responsibility. 1 Given at the 1970 Annual Meeting of the American Accounting Association, the poem, if such is a valid description, was composed by the first editor of JAR, David Green, and published in JAR [1970] with appropriate disclaimers.

Financial accounting and reporting by oil and gas producing companies : A study of information effects

Abstract This manuscript examines the joint hypotheses of market efficiency and information event content occasioned by the Financial Accounting Standards Boards release of the Exposure Draft entitled ‘Financial Accounting and Reporting by Oil and Gas Producing Companies’. In the Exposure Draft, the Board took the position that all firms would report using the successful-efforts method. Concerns were raised that such a change would have a negative impact on the ability of full-cost firms to raise capital. This impact should be reflected in the movement of security returns. The paper uses two methods to test for a difference in the distribution of security returns between full-cost and successful-efforts firms based on the issuance of the Exposure Draft. The first method examines the returns of unit-beta portfolios. The second approach employs prediction errors based on the market model. Our results are not conclusive. There is evidence from both tests of a relative negative impact on the returns of full-cost securities compared to the returns on successful-efforts securities, particularly around the announcement date. However, the strength of the results, when coupled with methodological issues, mitigate against concluding that the alleged substantial market effects exist.

The Investigation of Cost Variances

Managers are usually responsible for the control of the level of several process variables, such as cost, quality, rate of output, and so on. The levels of these process variables are known as the states of the system, and they may be represented by the values either of a continuous variable or by a discrete variable. It is assumed that these states can be ordered in terms of their desirability. Some processes may move only from a more desirable to a less desirable state while others may shift in either direction. These shifts may occur with or without the intervention of the manager. The control system is a plan formulated by management to indicate when intervention should take place. Three types of control systems are generally possible. The first involves no intervention by the manager until a breakdown of the process occurs. This approach is to be favored when the continued operation of the control system is less costly than the benefits to be derived from intervention. The second type of control system consists of periodic intervention by the manager for purposes of adjusting or otherwise influencing the process. The most compelling reason for this approach lies in its ease of application. The third approach bases the intervention decision on information obtained from the process. This information is typically obtained by sampling. The present paper will concentrate on this third type of control system. Several components are incorporated into any control system. First, the manager must establish the variable or variables to be controlled. He must

The Effects Of Alternative Accounting Techniques On Certain Management Decisions

The present study was designed to investigate the influence of alternative accounting techniques on some selected management decisions. In general terms, the investigator was concerned with whether or not the various alternatives available to the accountant in the presentation of financial data evolving from identical facts could have an effect on business decisions. In particular, this study explored the hypothesis that different inventory cost-flow assumptions would affect the decisions. Assume that two decision-makers, identical in every respect including their goal structure (which need not be specified), are given identical sets of data at a given moment in time. A reasonable hypothesis would anticipate identical decisions, except possibly for a random error. Now suppose the data are supplied in the form of accounting statements. Suppose further that, although the underlying economic facts remain identical, the accountant applies two different accounting techniques in reporting the impact of the facts on the enterprise. Would the decisions made still be indistinguishable? The two different accounting techniques chosen for the alternate reports related to the assumed cost-flow through the inventory accounts. The same basic facts were reported using both a first-in, first-out cost-flow assumption (referred to subsequently as FIFO) and a last-in, first-out costflow assumption (referred to subsequently as LIFO). These divergent cost-flow assumptions can affect the final reported profit figures particu-

An accounting change and information processing changes

Abstract Additional experimental evidence is presented about information processing changes made by individuals in response to an accounting change. Subjects apparently changed their information processing in response to a nonlinearity effect, but not in response to an accounting change and additional information about the change.

The intelligence of ambiguity

Abstract The major thrust of accounting practice, research and teaching rests on the rational-calculation model of decision making. Recent developments in the organizational theory literature challenge the singleness if not the primacy of the rational-calculational model approach. It is our purpose to examine some of the ideas being put forth in the behavioral sciences and attempt to discern some implications for management in general and accounting in particular. This paper was prompted by and owes a heavy debt to a paper by March (1978).

A Tribute to Professor Stephen A. Zeff

This tribute will address Professor Stephen A. Zeff’s scholarship and educational contributions to our profession. We begin with a brief history of how he came to select accounting as his field of interest, his early introduction to the field, and his professional contributions. The discussion then turns to his research, which typically reflects an historical approach to viewing the field. The last main section examines Professor Zeff’s work as a teacher, often as seen through his students’ reflections.

Observations on Jensen's Experimental Design for Study of Effects of Accounting Variations in Decision Making

In a recent issue of this journal, Jensen discussed his research design and the results of his field experiment on the effects of alternative accounting reporting techniques in portfolio selection and security evaluation. The attempt to obtain portfolio selection and security-evaluation decisions from professional investors is a significant move. The two questions posed to each subject in the study permit the investigator to examine concurrently, in the same experimental situation, the effects of selected alternative accounting techniques on the related, but separable, questions of portfolio selection and security evaluation.2 However, substantial questions can be raised about the statistical methodology and design employed by Jensen in this experiment and analysis, and this paper deals with these questions.