<p> I examine the importance of the properties of accounting information to equity investors by estimating the implicit prices of accruals quality and operating volatility revealed from observed stock prices. I measure accruals quality parameters based on the model in Nikolaev [2016], which separates the volatility of accounting error from the volatility of the performance component of accruals. I use the hedonic regression approach, which relies on rational expectations (<i>Bajari et al</i>. [2012]) to identify the effect of accruals quality on firm value. This approach isolates time-varying unobservable factors correlated with accruals quality. My findings indicate that investors have preferences for higher accruals quality. At the margin, a 1% increase in the volatility of accounting error results in a 0.50% decrease in the firm value. At the same time, my findings indicate that investors have preferences for lower operating risk, which statistically and economically dominates preferences for accruals quality. At the margin, a 1% increase in the operating volatility results in a 1.43% decrease in the firm value. Overall, my findings suggest that the effect of accruals quality on firm value is largely driven by the operating risk. This result is robust to the choice of the model of time-varying unobservable firm characteristics and to different sets of control variables.</p><p>

This study provides a test of the market valuation impact of Securities and Exchange Commission (SEC) enforcement actions for foreign firms. I examine the SEC enforcement policy towards foreign firms under its jurisdiction. In contrast to Siegel (2005) who examines earlier years, I find that the SEC's current (post-2002) enforcement intensity is considerable and has increased dramatically by comparison. I construct a novel test using the burgeoning series SEC enforcement events as changes to the legal environment that circumvents the issues associated with firm-level exchange-listing events (e.g. self-selection and simultaneous changes to firm traits). The tests focus on stock returns of foreign firms not targeted by the SEC during event windows surrounding SEC announcements of enforcements against foreign firms. This isolates the effect of a changing enforcement environment. I find that when the SEC takes action against a foreign firm, non-target foreign firms experience positive stock returns. Returns are amplified for firms from weaker home legal environments, suggesting that the returns are due to a perceived increase in SEC scrutiny. Finally, consistent with the market adjusting to the new enforcement regime, the magnitude of non-target firm returns declines with each sequential SEC enforcement action. The overall results provide evidence that SEC oversight plays a significant role in increasing the value of foreign firms, which supports the legal bonding hypothesis discussed in prior literature.

<p>The three essays focus on important facets of R&amp;D such as the impact of competition, regulation and the difficulties in measuring R&amp;D and the dollars to be allocated to R&amp;D by a firm. In the first essay, we investigate Aghion etal. (2005), model on the relationship between R&amp;D and competition. We identify limitations in previous empirical tests of the model. Further, R&amp;D appropriability plays no role in the model although literature assigns it a significant role. Our comprehensive tests reveal that the model does not fully explain the R&amp;D-competition relationship, and the results depend on the competition measure used. We investigate the role R&amp;D appropriability and confirm its significance. Hence the model needs refinements. This study enhances our knowledge of the role competition and R&amp;D appropriability play in enhancing R&amp;D and helps formulate policies that promote R&amp;D. </p><p> In the second essay, we analyze the changes in pharmaceutical firms' stock prices following the recall of Vioxx, Merck's blockbuster drug, apropos three theories based on government regulation, product liability, and firms' reputations. We conduct an event study of estimated abnormal share returns using a Fama-French 3 factor model under seemingly unrelated regression (SUR) estimation. Our investigations support government regulation theory and suggest that R&amp;D-intensive firms suffer maximum adverse returns. Adverse returns reflect anticipated regulatory changes in approvals for new drugs. Drug recall harms the industry and future availability of new drugs. Stable and fair drug approvals policy can help the industry flourish. </p><p> The third essay critically examines measurement of R&amp;D. R&amp;D capital and cited patents are used in the literature to measure R&amp;D intensity and investigate market returns for R&amp;D. The results are ambiguous. Previous literature suggests that patents are distinct from R&amp;D expenditure, and R&amp;D is influenced by competition. We suggest eight new measures based on the interplay between R&amp;D and competition. We empirically test these measures on pharmaceutical and computer software industries which have the highest R&amp;D intensities of all industries. The new measures are more significant than R&amp;D capital and offer further insights on R&amp;D in these industries. These measures help in capital allocation for R&amp;D at firm level which maximizes stock returns. </p>

<p> This dissertation consists of three essays studying the role of accounting data in predicting distributions of stock returns. In the first essay, I explore the ability of accruals to predict future price (earnings) crashes and jumps, representing extreme negative and positive observations in the distribution of firm-level weekly returns (changes in quarterly ROA). I find that high (low) accruals predict a higher probability of price and earnings crashes (jumps) than medium accruals. In the second essay, I re-examine the ability of asset turnover growth, which reflects growth in both assets and sales, to predict future stock returns. While the prevailing view is that this relation is due to the spread between sales and asset growth, my results suggest it is driven mainly by the asset growth component. I do, however, find that this spread is positively related to future returns for a subsample of firms that did not make significant acquisitions or divestitures. In the third essay, I re-examine the puzzling negative correlation between aggregate stock returns and aggregate earnings at the quarterly level. I find that the negative aggregate returns-earnings correlation is unstable and the negative correlation for the period of 1976-2000 is mainly caused by the negative correlation between aggregate earnings and discount rate news.</p>

Thesis (Ph.D.)--University of California, Berkeley, 2005. / (UnM)AAI3190806. Source: Dissertation Abstracts International, Volume: 66-10, Section: A, page: 3707. Chair: Brett M. Trueman.

Thesis (Ph.D.)--University of Washington, 2007. / (UMI)AAI3265436. Source: Dissertation Abstracts International, Volume: 68-05, Section: A, page: 2100. Adviser: Robert C. Higgins.

Thesis (Ph.D.)--Indiana University, Kelley School of Business, 2008. / Title from PDF t.p. (viewed on Jul 23, 2009). Source: Dissertation Abstracts International, Volume: 69-11, Section: A, page: 4394. Adviser: James M. Wahlen.

Scholars have argued that well-governed firms achieve better firm performance. This study addresses the question of whether a relationship exists between corporate governance mechanisms and the performance of non-financial firms listed on the Kuwait Stock Exchange (KSE). The study combines quantitative (OLS panel regression analysis) and qualitative (interviews) methods. Such triangulation will improve the understanding of the underlying process. The quantitative data produced mixed results. According to the OLS regressions, some governance mechanisms (e.g., non-executive directors, family members on boards, and dividends) positively relate to firm performance value while debt and ownership concentration (based on ROA only) negatively relate to firm performance. However, when the governance mechanisms are treated endogenously using 2SLS regression, based on both measures (Tobin's Q and ROA), several corporate governance principles, such as board size and role duality, have no relationship with firm performance whereas dividends and family directors positively impact firm performance. However, the ownership concentration, proportion of non-executive directors, and debt produced mixed results. The Hausman test provides evidence that the governance mechanisms are endogenous. In addition, if any causal relationship does exist, it would be from the governance mechanism structure to firm performance. The main findings of the qualitative data are similar. A significant change has emerged in Kuwaiti trends related to corporate governance, yet the current corporate governance principles in Kuwait are perceived as irrelevant. Ownership structure provides minority shareholders with weak rights. Meanwhile, family members on boards and role duality produce mixed views. However, other board variables such as the proportion of non-executive directors and board size are not effective. Finally, high dividends mean high firm performance while high debt leads to financial risks and problems with limited roles for Kuwaiti banks in monitoring.

<p> Due to the increase in corporate bankruptcy, financial distress studies have flourished since 1968. Firms do find themselves in financially distressful situations because of several factors including changing economic environment such as a decrease in aggregate demand, an increase in the cost of borrowed funds, and changes in government regulation. In addition to the Altman's z-score model, the sustainable growth rate (SGR) is another tool that is used primarily for financial planning. The problem with Altman's z-score model is that it does not consider whether a firm can be financially distressed or not if the sustainable growth rate of the firm is in fact higher than the growth rate of the firm's reported revenues. The purpose of this quantitative study was to investigate the efficacy of using ltman's z-score in forecasting financial distress of a firm when the sustainable growth rate was higher than the growth rate of the reported revenues. The sample for this study was drawn from all non-financial firms traded on the NYSE. The research question was investigated using two group design in two phases. Phase 1 involved the calculation of the sustainable growth rate (SGR), the growth rate of reported revenues, and the calculation of Altman's z-score. The Altman's z-score of the two groups were compared using Mann-Whitney <i>U</i> test to determine whether a statistically significant difference exists in the z-score. Phase 2 involved the correlation between the values of SGR and the values of Altman's z-score to determine if there was a statistically significant relationship between the two scores. The result of this research indicates that the Alman's z-score and the sustainable growth rate are conceptually independent and both can be used to ascertain whether a firm is financially distressed or not. In addition, result of this study provide practical application that could help management of firms reach important financial and managerial decisions. While the result of this study provided useful information and added to existing knowledge on financial distress, additional research using more than one year of financial data is recommended in order to confirm the results of this study.</p>

<p> This study employed a qualitative case study methodology to examine some of the challenges that are hindering the fragile state of Liberia from benefiting from the use of country public financial management (PFM) systems for donor-financed projects. The study also examined the effects that these challenges pose to the fragile state. It then explored recommended strategies and policies to resolve the challenges. The data for the study was collected from 15 participants through individual in-depth interviews. The cases of the 15 participants were cross-analyzed based on 4 themes and 13 patterns that arose from the participants' data for the challenges, 4 themes and 6 patterns that emerged from the effects of the challenges, and 5 themes and 13 patterns that emerged from the recommended strategies and policies of the participants. The findings revealed the cardinal or major challenges that, as the participants pointed out, obstruct or hinder the effective use of country PFM systems for donor-financed projects in Liberia. Amid the challenges, some were directly linked to government and others to donors. Moreover, the study observed that some of the challenges were interrelated. In addition, the findings also showed the effects that these challenges could pose to the country's future prospect in regards to country PFM systems use. The study then examined the various recommended strategies and policies for government and donors alike that could help solve the challenges the fragile state faces. The findings of this study fill a gap in practical research on fragile states, specifically Liberia, with regards to country PFM systems and add valuable information on how to effectively and efficiently deal with challenges for eventual full PFM adoption.</p>