The study involves a multivariate discriminant analysis (MDA) of financial ratios of 172 small businesses that during 1971-1976 borrowed fom 29 banking institutions representing 174 Florida banks. Of the 172 borrowers, 92 made timely repayment and 80 defaulted their loans. The study also contains an extensive review and evaluation of previous contributions to ratio analysis. / The study analyzes 54 industry and size-relative financial ratio variables ("relatives") for their usefulness as indicators of loan outcome. The determination of a value of a relative involves (1) computing the value of a financial ratio from financial data submitted by a borrower to a bank prior to a loan and (2) dividing that value by the mean value for a similar ratio computed from data appearing in the Robert Morris Associates (RMA) Annual Statement Studies for the period approximately concurrent with the borrower's financial statements. / The sample of 172 borrowers was split into two subsamples, each consisting of 40 defaulters and 46 non-defaulters. Analysis of one of the subsamples showed that dispersions of ratio values for defaulters and nondefaulters in the sample differed greatly. Consistent with that difference, a discriminant model using a quadratic decision rule proved more effective than a linear discriminant function for separating defaulters from nondefaulters. / The analysis produces a quadratic model containing 39 variables that correctly classifies 96.5% of the defaulters and nondefaulters in the subsample analyzed. For validation, the model was tested for efficacy in classifying the second subsample. The model successfully classifies 63% of the borrowers in the validation subsample. This result was tested for significance using normal approximation of the binomial distribution and was found significant at the .01 level. / The study concludes that information in small business financial statements is useful for short-term bank loan decisions, despite apparent inaccuracies in some of the unaudited data. The study also finds that MDA is effective for analyzing financial ratios as indicators of loan outcome. / Data for this study consists of a sample drawn from a population of loan recipients, rather than a population of loan applicants. Accordingly, if the model developed were to be used by a lender it should be regarded as an appellate model whose use is limited to reviewing decisions to lend that have been made using independent alternative models. / The study concludes that progress on three fronts is needed if empirically-derived, statistically sophisticated discriminant models are to play an important role in lending decisions. First, larger quantities of data must be collected for analysis and the reliability of data must be improved. Reviews or audits by CPA's of a larger percentage of the financial statements of small business borrowers are apparent means for enhancing data reliability. Second, analytical methods require additional refinement. In particular, methods are needed for selecting the variables to be retained for use in a nonlinear discriminant model. Presently available techniques appear to be less satisfactory for selecting variables for retention in nonlinear discriminant models as compared with linear discriminant functions. / Third, lenders must be educated as to the usefulness and the limitations of statistical lending decision models. Only if lenders are convinced of the potential usefulness of the models and the financial data on which they are derived will those lenders require from borrowers and provide to researchers the quality and quantity of data needed for continued progress in financial ratio analysis. Only if they are convinced of potentially beneficial results will lenders adequately test statistical models in real decision situations. / Source: Dissertation Abstracts International, Volume: 41-02, Section: A, page: 0714. / Thesis (D.B.A.)--The Florida State University, 1979.

The purpose of this study was to explore whether macroeconomic prediction models (which incorporated firm specific, general economy, and industry predictor variables) could provide predictions which consistently have greater accuracy than management forecasts. / Management's forecasting ability was tested against forecasts of five prediction models which have been used by previous researchers. A sixth prediction model, the macroeconomic model, was also tested. / Each prediction model was generated using historical data up to the year of the management forecast. Forecasted amounts for the firm specific variable, GNP variable, and industry variables were inserted into the estimated forecasting models. / The forecasts from this double prediction process, along with those of management, were compared to the actual outcome by using the absolute percentage error. / Non-parametric statistical tests were used to test the null hypothesis of no difference in forecasting performance. / The empirical results of this inquiry showed little significant differences among the prediction models. However, management's forecasts were significantly more accurate than forecasts produced by any of the prediction models. / Source: Dissertation Abstracts International, Volume: 43-02, Section: A, page: 0486. / Thesis (D.B.A.)--The Florida State University, 1982.

Financial statements contain corporate pension plan information. This information includes a value for the unfunded pension liability. The unfunded pension liability is the present value of the future expected difference between the underlying pension plan portfolio and the retirement day benefits. The distribution of possible differences provides a valuation problem for accountants. / The distribution of pension plan portfolio values translates into a distribution of unfunded pension liabilities. The valuation of this distribution of differences is similar to the valuation of a put. A put is a contingent claim which gives the holder the right to receive a specified payment (exercise price) at some future date in exchange for an asset (underlying security). The put has value because the uncertain underlying asset (pension plan portfolio) may have a value less than the exercise price (retirement benefits). The expectation of the present value of differences is the put value. This expectation of differences is analogous to valuing an unfunded pension liability. Therefore, models that are appropriate for valuing puts are appropriate for valuing unfunded pension liabilities. / The put valuation model used in this research is the Black-Scholes-Merton model. This model uses a riskless discount rate to discount future differences. A surrogate for the riskless discount rate is a Treasury Bill or Bond rate. Since corporations have an incentive to manipulate the value reported for the unfunded pension liability, a market-determined discount rate reduces the manipulative aspects of the discounting process. In addition, the plan portfolio is assumed to be a market portfolio. The market portfolio represents the risk preferences and beliefs of a market-based set of individuals. As such, the market portfolio fits the requirements of the ERISA of 1974 "prudent man" rule. / A simulation is used to test the sensitivity of the model to changes in the annual specification of variables. The results provide evidence that the model produces a range of values that is one-third the present total actuarial model range. This limited range and the market-determined riskless discount rate are the main advantages of this model. / Source: Dissertation Abstracts International, Volume: 43-09, Section: A, page: 3042. / Thesis (D.B.A.)--The Florida State University, 1982.

As corporations become more environmentally aware, accountants must deal with constantly changing environmental issues and regulations. The purpose of this dissertation was to examine descriptively and empirically the environmental disclosures made by a sample of chemical firms. Three sources of disclosures were examined. These sources included: (1) the Environmental Protection Agency (EPA), (2) the press, and (3) the firm. / The findings indicate that environmental disclosures are generated both internally and externally. The majority of the 3,705 disclosures examined were current in nature, were found in press sources, were nontechnical in nature, were qualitative in nature, dealt with pollution issues, and mentioned no specific environmental regulations. Using cluster analysis, the firms clustered into high, medium, and low disclosure categories based on environmental and financial data. In addition, the EPA press releases were examined for information content using a variance methodology. The results showed a reaction to the EPA press releases during the disclosure week and in some instances the reaction continued for several weeks following the disclosure. / Source: Dissertation Abstracts International, Volume: 54-07, Section: A, page: 2640. / Chairman: William A. Hillison. / Thesis (Ph.D.)--The Florida State University, 1993.

This dissertation investigates empirically the factors associated with the auditor's going concern opinion modification decision. While previous research has focused on internal financial ratios, this dissertation attempts to explain and predict the auditor's going concern determination by modelling the decision as a function not only of the financial condition and prospects of the client, but also non-financial variables (factors "external" to the financial condition of the client) associated with inappropriate modification/non-modification. Such external factors include audit fees, tenure, auditor and client industry litigation, auditor client losses, the change in audit report lag, and the existence of previously disclosed evidence of going concern difficulties. In addition, this dissertation provides early evidence on the impact of SAS No. 59 on the auditors' going concern decision. / The results of the study show that, while classification accuracies are actually higher (based on AICPA Professional Standards guidelines) than previously reported, auditors' going concern modification decisions are influenced by factors other than clients' financial condition. Further, early evidence indicates that SAS No. 59 does not appear to have an effect on the auditors' going concern decisions. / Source: Dissertation Abstracts International, Volume: 54-07, Section: A, page: 2641. / Major Professor: Stephen W. Wheeler. / Thesis (Ph.D.)--The Florida State University, 1993.

Prior research examining the effects of earnings release timing on the parameters of the linear model relating unexpected earnings and unexpected stock returns can conveniently be divided into studies based on either the "bad news is delayed" behavioral motivation or the predisclosure information environment argument. This dissertation proposes that the position the firm takes in its industry earnings release queue (PERQ) represents a firm-specific information production parameter associated with cross-sectional differences in the earnings response coefficient (ERC), and extends the literature by examining the two aforementioned arguments jointly while controlling for previously identified ERC determinants. / Trueman (1990) provides an analytical link between report timing and the industry environment. Market participants recognize the ability of firm managers announcing later in the ERQ to manage reported earnings, and react more positively to earnings reported earlier. Trueman provides two models, one where earnings management requires a delay in reporting, and one where earnings management does not depend on the release of other industry members' earnings. The models differ in their relationship between the differential security price reaction between early and late announcements and the unexpected industry earnings. This dissertation extends the literature by testing Trueman's analytical models. / The results indicate that PERQ is a firm-specific information production parameter negatively associated with cross-sectional differences in ERC. Trueman's analytical model assuming earnings management does not depend on the release of other industry members' earnings was found to capture the market's response to industry release timing. / Source: Dissertation Abstracts International, Volume: 55-07, Section: A, page: 2038. / Major Professor: Stephen P. Baginski. / Thesis (Ph.D.)--The Florida State University, 1994.

The purpose of this study was to examine whether structural change modeling procedures improved the predictive ability of quarterly earnings-per-share across industries. The structural change detection methods derived by Chen (1984), Chang, Tiao, and Chen (1988), Chen and Tiao (1990) and Lee and Chen (1990) were employed in order to determine the time points when structural change occurred. These interventions were then included as intervention transfer functions in ARIMA models. / The structural change models generally outperformed their non-structural change counterparts. However, this finding did not hold for all 9 industry definitions. Value Line was superior to the structural change models on a full-sample basis. However, in several industries there were no significant differences among Value Line and the structural change models. / This research also examined the predictive ability of composite forecasting models. Non-structural change as well as structural change composite models were constructed. In general, the non-structural change equally-weighted composites were not superior to financial analysts. In addition, the structural change composites outperformed the non-structural change composites for some models. / This study has shown that structural change modeling procedures offer improvements in the prediction of quarterly earnings-per-share. This result may be viewed as an initial step in examining many future research issues. These issues include the differential forecasting abilities of analysts versus statistical models, the variables which partition these aforementioned differential forecasting abilities, the linkages of management decisions (or random events) with a firm's earnings structure, and others. / Source: Dissertation Abstracts International, Volume: 55-07, Section: A, page: 2040. / Major Professor: Kenneth S. Lorek. / Thesis (Ph.D.)--The Florida State University, 1994.

An empirical analysis of the characteristics of firms choosing early adoption of SFAS No. 96 was conducted. Positive accounting theory forms the basis for the analysis. Two analyses are presented. The first analysis compares characteristics of a sample of firms that adopted SFAS 96 with characteristics of a control sample of firms that did not adopt SFAS 96. The second analysis compares characteristics of firms adopting SFAS 96 in the first year possible with characteristics of firms adopting SFAS 96 in later years. The characteristics examined in the first analysis are firm size, leverage, and dividend payout. In addition to the characteristics examined in the first analysis, the second analysis examined two variables representing each firm's return on assets. / The results of the first analysis indicate that, when adoption of SFAS 96 results in an increase in net income, the firms adopting SFAS 96 are smaller and more highly leveraged than the non-adopting firms. There is no significant difference between the two groups for the dividend payout variable. The results of the second analysis indicate that, when adoption of SFAS 96 results in an increase in net income, firm size, leverage, and dividend payout are not determinants in the timing of adoption of SFAS 96. However, the level of return on assets is a determinant in the timing decision. In particular, firms having lower return on assets compared to prior years return on assets are more likely to adopt SFAS 96 in the first year possible. Firms with higher return on assets are more likely to postpone adoption. This finding is consistent with the income smoothing hypothesis, and is not consistent with the bonus maximization hypothesis proposed by Healy (1985). / Source: Dissertation Abstracts International, Volume: 54-02, Section: A, page: 0582. / Major Professor: Thomas Schaefer. / Thesis (Ph.D.)--The Florida State University, 1993.

The use of microcomputers as workstations linked together with other shared devices in a local area network (LAN) is receiving more and more attention today. When LANs are used in a business environment with accounting processing systems, auditors are faced with the task of evaluating internal control of the network. This study has investigated internal controls and EDP auditors' evaluations of internal controls in LANs processing billings and sales. / From a pilot study using subjects with experience in evaluating internal control in an EDP environment from five of the Big Eight accounting firms, seventeen controls were identified as important in LANs and were classified into the categories of workstation controls, processing controls, data and program security, and supervisory controls. Saaty's Analytic Hierarchy Process (AHP) was then used to investigate the relative importance of each control and each category of control to the quality of internal control, in the opinion of individuals with experience in EDP internal control evaluation. With the approval and assistance of every Big Eight firm, eighty-five questionnaires were distributed to a sample of such individuals, from which fifty-one subjects (60%) responded. Using the AHP measurement methodology, individual judgment models were constructed. The level of agreement (or disagreement) among the EDP auditors in their judgment models (i.e., consensus) was measured by determining for every pair of respondents the inter-rater correlations of the cue weights for the controls in their models. Hypothesis tests for differences in consensus among firms and across experience levels were also conducted. / Source: Dissertation Abstracts International, Volume: 45-01, Section: A, page: 0218. / Thesis (D.B.A.)--The Florida State University, 1984.

This study develops bankruptcy prediction models which can be used by decision-makers. Use of prediction models may reduce losses from erroneously classifying firms as bankruptcy candidates or as survivors. / Existing research has produced models which use either ratios or information measures as prediction variables. This study differs from most previous research on bankruptcy prediction in that it is based on a combined model which includes both information measures and ratio changes. Furthermore, realistic prior probabilities and ratios of misclassification costs are incorporated into the models. The predictive ability of the various models are tested using a hold-out sample from a future period. / Overall, this study finds that the combined model has a lower percentage of misclassification than either the ratio model or the information model. Relative costs for the ratio model and the combined model are less than for the information model, but the cost comparison between the combined model and the ratio model is inconclusive. However, both a maximum chance model and a proportional chance model outperform the information model, the ratio model and the combined model with respect to relative costs and the percentage of correct classifications. / The reestimated Moyer's model performs worse than the information model, the ratio model and the combined model with respect to the percentage of correct classifications. But, Moyer's model outperforms the maximum chance model with respect to relative costs when the prior probability and/or cost ratio are (is) high. / Source: Dissertation Abstracts International, Volume: 45-02, Section: A, page: 0560. / Thesis (D.B.A.)--The Florida State University, 1984.