Bhushan (1989), O'Brien and Bhushan (1990) and Brennan and Hughes (1991) have identified specific firm characteristics that they find to be associated with either the level of analyst following or year-to-year changes in security analyst coverage (or both). This dissertation extends these investigations by examining additional earnings-related firm-specific variables that were found to be significantly associated with aggregate analyst coverage decisions. / Drawing upon findings reported in the "earnings response coefficient" literature, I argue that analysts have an incentive to identify and follow those firms whose time-series properties reveal historically persistent earnings innovations and less predictable earnings patterns. Two additional hypotheses first posed by King, Pownall and Waymire (1990) concerning analyst coverage were also examined within the framework of the developed model. Finally, market value was disaggregated into separate price and shares outstanding variables to investigate differential effects. / The results indicate that analysts can and do identify those firms with more persistent and less predictable earnings and concentrate research effort on these companies vis-a-vis other sample firms. The hypotheses of King et al. (1990) were also confirmed. The findings suggest that more analysts follow those firms with an earnings history that has proven informative in predicting earnings changes of industry co-members. Also, increased levels of (size-adjusted) research and development expenditures attracts analyst attention. Finally, as predicted, shares outstanding was found to be positively associated with analyst coverage while the effect of share price proved insignificant. / Source: Dissertation Abstracts International, Volume: 53-10, Section: A, page: 3584. / Major Professor: Kenneth S. Lorek. / Thesis (Ph.D.)--The Florida State University, 1992.

This study extends the existing research on the use of financial statement variables to predict one-year-ahead earnings changes. A principal component analysis was conducted on 61 financial statement variables in an attempt to describe the dimensionality of the variables and facilitate the development of parsimonious earnings prediction models. This study finds that the 61 variables embody a much richer array of information than suggested by previous research. The variables could not be described by a small number of principal components. / The effect on the predictive ability of different earnings prediction model specifications was assessed by examining 36 different models. It was found that (1) models using a dichotomous earnings change variable as the dependent variable performed as well as models using a trichotomous earnings change variable; (2) models with a one-year drift term achieved greater predictive ability than similar models using a four-year drift term; (3) models with the strongest fit in the estimation period did not necessarily dominate in the predictive ability tests; and (4) the accuracy of the predictions of many of the models in this study was greater than the results obtained in previous studies. / This study also provides additional evidence on the extent to which the information regarding one-year-ahead earnings contained in current financial statements is fully reflected in stock prices. It was found that a simulated trading strategy did not perform well in the period subsequent to 1983. Evidence is also provided that the trading strategy generates abnormal returns in periods extending beyond 36 months. This provides further support that the probabilistic measure of one-year-ahead earnings changes is proxying for differences in expected returns rather than exploiting the underutilized information contained in financial statements. / Lastly, three stratifications of the sample firms did not increase the performance of the trading strategy on a consistent basis. Although one stratification did increase the effectiveness of the strategy, it is likely it did so by further sorting firms according to determinants of expected returns. / Source: Dissertation Abstracts International, Volume: 56-10, Section: A, page: 4032. / Major Professor: Kenneth S. Lorek. / Thesis (Ph.D.)--The Florida State University, 1995.

It is a common belief among practitioners that stock splits and stock dividends are perceived by investors as good news. Numerious empirical studies find significant abnormal returns at stock distribution announcements. The mechanics of a stock distribution, however, affects neither the equity of the company nor the shareholders' ownership position. This study extends previously documented market reactions to stock distribution announcements by presenting a justification for management decisions to issue stock distributions, and provides an explanation for security price reactions to their announcements. / Based on stock price reactions to announced company earnings, an information content theory is developed where stock price reactions at stock distribution announcements are related to investors' expectations of increased future earnings. A study of earnings expectation revisions around stock distribution announcements is conducted, where changing earnings expectations are measured both ex-post and ex-ante. A matched sample design is used to compare earnings changes at stock distribution announcements between companies issuing and not issuing these distributions. / The ex-post study documents positive abnormal earnings and shifts in actual company earnings around stock distribution announcements. Through rational expectations, a significant positive relationship between stock distribution announcements and actual earnings changes indicates that investors anticipate earnings growth following these announcements. The ex-ante analysis documents a strong positive relationship between stock distribution announcements and changing analysts' forecasts of company earnings, indicating investors' expectations of future earnings are affected by stock distribution announcements. The documented relationship between stock distribution announcements and changing earnings expectations supports the hypothesis that stock distribution announcements convey information about expected future earnings increases to investors, and market reactions at stock distribution announcements reflect this expectation. The findings of this research provide insight into managements' stock distribution decisions, the role of stock distribution announcements in investment decision making, and informational signaling. / Source: Dissertation Abstracts International, Volume: 49-03, Section: A, page: 0546. / Major Professor: David R. Peterson. / Thesis (Ph.D.)--The Florida State University, 1987.

The industrial learning curve has been widely recognized as an important cost planning tool. Limited empirical work has been done on factors affecting the learning curve parameters, and no study has examined simultaneously the effects of standard difficulty and compensation method. These factors were chosen for study because the literature has consistently demonstrated that difficult standards produce superior performance relative to easy standards, and that monetary incentives produce superior performance relative to fixed pay. / A laboratory experiment was conducted which consisted of an assembly task using Erector Set parts; the task was chosen because it seemed to require skills similar to what would be required for industrial assembly tasks. Six treatment groups were formed based on two standard levels (average and difficult) and three compensation methods (fixed, piece-rate, and goal-contingent). / The effect of these factors were assessed first on overall performance. A significant main effect for compensation method was found, which was due to the superior performance of subjects working for piece-rate and goal-contingent pay (incentive pay) relative to those working for fixed pay. Regarding the learning curve parameters, it was found that incentive pay resulted in lower a values, but slower improvement rates as measured by the b parameter. This finding contradicts previous speculation that incentive pay should not affect the a parameter and positively affect the b parameter. The implications of these findings are discussed. / Source: Dissertation Abstracts International, Volume: 52-09, Section: A, page: 3337. / Major Professor: Charles Bailey. / Thesis (Ph.D.)--The Florida State University, 1991.

An objective of both economic structural and accounting time-series literature has been to understand the economic factors driving the systematic properties of corporate earnings. The purpose of this dissertation is twofold: (1) to help explain why these research areas are unable to find the same economic factors consistently significant across studies within their respective disciplines; and (2) to investigate economic factors previously omitted in time-series research and the economic factors that have a substantive effect on corporate earnings. / The empirical evidence from this study did not support the theory that the autocorrelation function is a better dependent variable than the rate-of-return that has been used in structural research. Thus the evidence does not suggest that the inconsistencies are due to a poor choice of dependent variable. However, the evidence does suggest that inconsistent results in accounting time-series research regarding the barriers-to-entry and size variables is inconclusive for the former, however, for the latter there is strong support for the size hypothesis that consistent significant results on the size variable occur when properly proxied by the log market value of equity. However, the economic factor omitted in previous accounting time-series research is the product differentiation variable. Due to its lack of variation across the sample no conclusions can be drawn with regard to the product differentiation variable. / The investigation into which of the economic variables may have a substantive effect in quarterly time-series analysis indicated that the size variable (proxied by the log market value of equity) has a substantive effect across all lags. In addition, there is limited support for substantiveness of the barriers-to-entry and product type variables. / Source: Dissertation Abstracts International, Volume: 52-06, Section: A, page: 2197. / Major Professor: Kenneth S. Lorek. / Thesis (Ph.D.)--The Florida State University, 1991.

This study tests the equilibrium of after-tax rates of return described in Miller (1977) by investigating whether a change in tax rates affects the return of an investment asset that is not directly taxed by the rate being changed. Using a model of after-tax investment returns I predict the yields of Treasury bills, which are subject only to ordinary tax rates, have an inverse reaction to changes in the capital gains tax rate. In a sample of daily Treasury bill data, yields appear to increase in response to the surprise reduction in capital gains tax rates on May 7, 1997. While small, this increase is statistically significant and is robust to other macroeconomic determinants. These findings contribute to the accounting literature on taxes and investment pricing by providing evidence of Miller's after-tax equilibrium in a potentially cleaner setting than is used in previous studies. Evidence that a financial instrument subject to ordinary rates alone may be affected by the announcement of a change in the capital gains tax rate suggests that shareholder-level taxes are capitalized into prices in ways not investigated by existing research. Accounting researchers will find these results useful because they suggest that the effects of changes in tax rates on asset prices are likely misstated in studies using settings where both the ordinary and capital gains tax rates change. Since the Treasury bill yield forms the basis of many consumer contracts, such as credit card agreements, policy makers should also be interested in these findings because they suggest changes to the capital gains tax rate may have unintended market consequences.

This dissertation examines the role of taxes and financial distress costs in the incremental financing choice between private and public debt. Theory suggests it is easier to renegotiate and restructure private debt claims outside bankruptcy. While financial distress costs may matter in the choice between private and public debt, the primary motivation for this study is to examine whether the relationship between financial distress costs and the private-public debt choice is dependent on firm's marginal tax rates. The point being firms more likely to default on their debt will exploit tax savings using private debt claims. Using a sample from the SDC database, I find a positive relationship between the issuance of private debt and the proxy for firms' financial distress costs. Additionally, I find a positive and significant relationship between the interaction of taxes and financial distress costs and the issuance of private debt claims. This supports the argument that the relationship between financial distress costs and the choice of debt is dependent on the firm's tax status. The intuition is that while financial distress costs differ between private and public debt claims, firms are likely to exploit this cost differential in the presence of positive tax savings available through the issuance of debt. Overall, the results are robust to alternative specifications of financial distress costs. The empirical models also control for variables that may lead to cost differential between private and public debt claims. I find firms with high growth opportunities are more likely to issue private debt claims. Consistent with the economies of scale argument, I find public debt tend to be denominated in large issues. I also find that large firms are more likely to issue in public debt markets. One argument here is that large firms do not require the close monitoring provided by private lenders. Finally, as documented in prior studies, I find that regulated firms are less likely to issue private debt claims.

The purpose of this dissertation is to examine investment decisions made by managers of firms having a portion of their assets committed to projects classified (for financial accounting purposes) as investments in marketable securities, and the corresponding consequences of such decisions on the firm. Of particular concern are managers' decisions to select investment alternatives emphasizing non-optimal investment projects, as suggested by a speculative intent. The research focuses on two main issues: (1) identifying the environment most conducive to finding the existence of marketable security investments; and (2) the effect on firm performance of holding various levels of this type of investment. Results provide support for the existence of investments in marketable securities in settings where an abundance of investment opportunities exist. This finding is consistent with the notion that growth firms have more incentive to smooth earnings and are in continual need of funding for profitable investment projects. The results also indicate that, compared to firms with no investments, firms with a relatively low level of investments in marketable securities have higher firm performance. However, as the level of marketable security investment increases beyond this threshold, the performance of the firm eventually declines below that of no-investment firms.

This study investigates the impact of growth on the value relevance of accounting data. Indirect evidence in the contracting literature suggests differences in value relevance is negatively related to growth, but to date evidence to empirically document the relationship is mixed. In contrast to previous research, this study analyzes the effect of growth on value relevance from a security price perspective, using the recently developed Ohlson model, and uses the analysts' five-year growth in EPS forecast as the proxy for growth which focuses on growth in terms of value to the investor. This study also considers the effect of growth on the persistence of abnormal earnings as well as the incremental information content of book value beyond earnings. The results provide evidence that the value relevance of accounting data is decreasing in growth. These findings are robust to different samples, other growth proxies, and controls for size and the lead-lag structure of prices and earnings. The evidence relating growth to persistence is inconclusive, suggesting persistence is more sensitive to the characteristics of the individual firms which make up each growth portfolio than the quality of accounting data. The findings also indicate the incremental information content of book value is greater for low growth firms compared to high growth firm, further supporting the hypothesis that the accounting data of high growth firms does not capture value relevant events as well as the accounting data of low growth firms. Overall, this study contributes to the understanding of cross-sectional differences in the valuation of securities by providing evidence that growth negatively affects the quality of accounting information.

During the last ten years, the number of workers covered by defined benefit retirement plans has fallen precipitously. At the same time the number of workers covered by defined contribution plans has climbed to record levels. This study examines whether the changes in accounting and tax regimes contributed to the decreasing emphasis by firms on defined benefit pension plans. I control for economic variables identified in prior studies as determinants of pension choice. I also control for variables identified in the popular press as being responsible for the change in emphasis. This study extends prior pension choice literature by looking at previously identified pension determinants over an extended period of time and interacts those determinates with changes in accounting and tax regimes. I find that both the changes in accounting and tax regimes motivated firms to de-emphasize defined benefit plans.