Empirical evaluation of accounting income

Empirical evaluation of accounting income With the rise of multinational companies and the growth of transnational investments, there has been an increasing demand for an empirical evaluation of accounting income numbers. The Ball and Brown study in 1968 broadens this area of accounting research. With the rapid development of the literature, there are more than 1000 published papers in academic accounting and finance journals in the last thirty years (Kothari, 2001). However, several accounting experts assert that there are some weaknesses in the research of Ball and Brown. Meanwhile, critics argue that their empirical evaluation contributed to the accounting research since late 1970s. The purpose of this essay is to introduce the strengths of Ball and Browns paper and identify its influence on the development of accounting. This essay will argue that the limitation of the paper is not serious, but its advantages are very significant. First, arguments for and against the empirical research are discussed. Then, an evaluation is explored .Lastly, a conclusion is presented. 2. The weaknesses of the paper The major motivation of the Ball and Brown study is to use empirical evidence to prove whether the accounting income numbers convey information of firms financial performance. They pioneered capital markets research in accounting. However, their study still has some weaknesses. 2.1 Unreliability The reliability of their results depends on the sources of information, which may be a potential limitation of the study. Although we are not disputing the reliability of the said sources, they should be investigated. Research should be conducted to document various types of institutions. According to Zhang (2007), the selection of the sample did not include companies meet the following four conditions. The first one is the failed company. The second one is a company whose financial year does not end on the 31st of December. The third one is the company that is not recorded in the CRSP database of stock price research centers. It also includes the young firm that is not described by the Wall Street Journal. Given those situations, the generality and reliability of their results may be reduced. 2.2 Limitations The research firmly supposes that some information of stock prices can be reflected by the earnings. However, the Ball and Brown study did not use a statistical test to ascertain whether there is any difference between earning information and the information reflect in the stock prices. Rayburn (1986) asserts that stock returns have been statistically compared with cash flows, earnings, and accruals during the 1980s. Aside from providing a formal test, sketchy information of cash flow was used in previous research. The succeeding studies used more comprehensiveness expectation models to separate the unanticipated components of earnings, accruals, and cash flows, given that returns in an efficient market only reflect the unexpected components (Livnat et al., 1990).ListenRead phonetically 3. The strengths of the paper Although the weakness of this paper is obvious, the design of variables and the results of the test have made outstanding contributions to research of accounting income. 3.1 Ingenious design of variables After identifying the research themes, Ball and Brown selected the most representative accounting income numbers to measure the information content. Considering that shareholders are more concerned about EPS and net income, Ball and Brown used them as variables. To determine the information content of the accounting income, they used market efficiency hypothesis and the capital asset pricing model as references. According to the efficient market hypothesis, the authors maintained that observable stock price is fluctuant and linked with information. This can mean that accounting income numbers are useful. The key to determining the relationship between accounting income and stock price is to distinguish the security prices of a particular company as well as all the other companies. Therefore, the authors built two models of market expected return to examine how the market reacts to accounting income numbers. Ball and Brown separated factors that affect earning into two different kinds: specific factors and system factors. System factors affect all companies, thus, the surplus of one company and other companies can be linked with each other. If the link is suitable, then stability can be shown using a fixed function, enabling us to achieve the income conditional expectation of one company based on other companies data. Thus, changes in the unexpected surplus of earning can be estimated by calculating by the changes in both actual income and conditional expectation. The authors defined the difference as the gain of current information. At the same time, they assumed that the changes in policy and corporate have been enacted before the first estimation. Thus, the influence of macroeconomic and policy changes can be estimated jointly. The authors initially used the Ordinary Least Squares (OLS) to estimate the linear regression coefficient and intercept of samples annual income changes and average income changes. Secondly, the changes in the market income average were used as independent variables and included in the regression model to calculate the expected value of income changes. Finally, the changes in the value of unexpected earnings (prediction residual) referred to the actual value of the earnings change minus the change in earnings expectations. Therefore, market effect was removed from the estimation of expected surplus, which means the authors did not take system factors into account. Similarly, the factors affecting the impact of no stock or stock returns can still be separated into two factors: system factors and specific factors. First, the authors used capital asset pricing model to separate the system factors and from non-system factors, then calculated the deviation of actual rate return and expected stock return. Secondly, Ball and Brown calculated the companys stock return residuals (abnormal returns). Given that markets are efficient, stock prices will adjust quickly and effectively about the new information, so residuals can show the impact on stock prices of new information. To test the validity of statistics, Ball and Brown used an alternative model- naive model. In this model, an alternative variable is the expected surplus for last years actual surplus. The naive model does not eliminate the market effects, but verifies the earnings per share targets. 3.2 Remarkable results This paper distinguished expected changes and unexpected changes in accounting incomes to estimate the abnormal return and changes in unexpected accounting incomes. In addition, it theorized that when the surplus prediction error is negative, it is both advantageous and disadvantageous. This paper presented the hypothesis that if the accounting income numbers could be linked with stock prices, then the announcement of accounting income numbers could result in changes in the stock returns. In the empirical test, the authors defined the month of annual report as 0, API representing the abnormal performance index of month M. In the process of calculating the API, the changes in unexpected earning are first separated into two groups (positive and negative), and then all samples are calculated together. Ball and Brown thought that if accounting income is related to stock returns, it can be assumed that if the changes in unexpected surplus are positive, then API is larger than 1; if they a re negative, then the API is less than 1. In the combined sample, API is close to 1. Ball and Brown thought that annual income report can provide new information; however, it cannot be transmitted in time, because most of its content comes from various sources (interim report and non-accounting information, annual accounting report is only one of them) .The authors also found that after the announcement of the annual report, API has a tendency to drift on, that is, revenue projections residual error signal and the relationship between stock returns in the annual report may be continued for two months. After analysis, which may be caused by the transaction costs, and excluding the impact of transaction costs, the market reaction to the numbers tends to be unbiased. 4. Evaluation At first glance, one weakness of this empirical research is the limitation of the sample which may decrease the generality and reliability of the results. However, the selection of the sample was similar to the tests used in related literature, which could lead to consistent results if used the same way on other samples. The weaknesses of the paper also include the limitation of the statistical tests. Nonetheless, it had a significant impact on later research. In 1968, the Ball and Brown study shows that accounting earning announcements contain information content. In the meantime, they link the sign of monthly abnormal stock return with the sign of the previous years earnings change. Starting with Ball and Brown, many studies began to compare alternative accounting performance measures, such as historical cost earnings, current cost earnings, residual earnings, and operating cash flows with stock returns. Under the similar circumstances, the Ball and Brown study also facilitated Watts and Zimmermans positive accounting theory in the late 1970s (Watts and Zimmerman, 1979). As Watts and Zimmerman (1990) point out, most accounting research since Ball and Brown has been positive, and the role of accounting theory is no longer normative. According to Kothari (2001), Ball and Brown heralded the positive-economics-based empirical capital markets research in the late 1960s. The theoretical and methodological innovation of the early accounting research was founded by the concurrent developments in economics and finance. Without this historical exploring of Ball and Brown in early capital market research, even seasoned researchers may have to detour or lose continuity. In addition, this paper analyzes the insufficiency of theoretical studies using empirical testing to find out whether the accounting income numbers are useful. It initially provides reliable evidence that stock markets can influence annual reports. Then researchers began to do a lot in reflect of stock market. Furthermore, the method used is also applicable to a large number of accounting and financial issues, including dividend announcements, earnings announcements, mergers and acquisitions, and investment spending. 5. Conclusion This essay has discussed the weaknesses and strengths of the empirical evaluation of accounting income numbers by Ball and Brown. Although this research has some limitations, the merits far outweigh the disadvantages. It preceded the positive-economics-based empirical capital markets research of the late 1960s. The theoretical and methodological innovation of the early accounting research was founded by the concurrent developments in economics and finance. Therefore, it is suggested that this research plays a great role in the development of accounting .In this essay, only a few strengths are mentioned; the ways of putting these benefits into practice need further exploration.

Where ever people live together law and rules are developed

Law is an interesting profession to choose and lawyers make a difference in people’s lives. A career in law means a commitment to the peaceful resolution of disputes. The disagreements are not likely to be eradicated hence the need for lawyer is not likely to disappear. In order to remove complexities in the environment law is a requirement. Where ever people live together law and rules are developed. Rules are necessary for settling of disputes. Law is a group of rules that are enforced by the government through police, its courts and the agencies. Law helps people to peacefully live in a society. If there was no law every man could do whatever he feel like doing. There are two types of law which includes civil law and criminal law. Civil law settles disputes between people and companies. Whereas criminal law is concerned regarding crimes and actions that cause harm to an individual or group. Law enforcement is one of the most important ways a government has of protecting its citizens. I am very eager and enthusiastic about the law profession since my high school started. I was impatiently waiting for my school to over so that I can begin with my law school. From the beginning of my school I was really involved in all the law related discussions and used to spend ample amount of time on searching for law profession. I used to keep myself updated with all the legal matters going around. Law has become a passion for me and I’m very keenly waiting for the response for admission in the law school. I frequently read many case studies and articles on law and try to apply the knowledge to do the analysis. In the end I would conclude that no society could exist if all people did just as they are pleased and the law thus establishes the rules that define a person's rights and obligations.

Macbeth †Study Notes †Act II Essay

1.Who accompanies Banquo at the opening of Act 2? What is his relation to Banquo? Fleance is the one who accompanies Banquo. He is his son. 2.What is Macbeth’s hallucination before he murders Duncan? What does this mean? Macbeth’s hallucination is a dagger which he wants to grasp but of course he can’t, and he realizes that he is seeing the dagger that he plans to use in the murder, a dagger which beckons him toward King Duncan’s door, and a dagger upon which appear thick drops of blood. He understands that â€Å"It is the bloody business which informs / Thus to mine eyes† (2.1.48-49), but he is not horrified. Rather, he wants to be as deadly as that dagger. 3.What reason does Lady Macbeth give for not committing the murder herself? Duncan looks like a father and that is why Lady Macbeth does not want to commit the murder herself. 4.Why do Duncan’s sons decide to leave Scotland? They doubted something and by leaving Scotland, they’ll have a little additional safety, because no one will be able to kill them both at once. 5.In Scene 2, why couldn’t Macbeth say â€Å"Amen† when a voice said â€Å"God Bless Us†? In Scene 2, Macbeth could not say â€Å"Amen† when a voice said â€Å"God Bless US† because it was part of his hallucinations. 6.The images of blood and water are interwoven in lines 55-68 of Scene 2. What does each suggest? It is the blood on his hands that causes this horrible fascination, and he  feels that the blood can never be washed away. Before his hands are clean, they will make all the seas of the world turn red. The water usually represents being free of something, wiping away the guilt, and bringing back innocence even though just metaphorically. By washing his hands with water Macbeth thought he would erase the guilt that was behind it. 7.How do the difficult attitudes of Macbeth and his wife to their bloodstained hands serve to point up the basic difference in their characters? Both Macbeth and his wife want to clean their hands by using water, but Macbeth feels as if the blood will never go away because he is really feeling guilty for the crime he committed. While his wife, Lady Macbeth thinks that the water will clean the blood, and everything will be as before. 8.What is ironic about Macduff’s replying to Ross’ question, â€Å"Those that Macbeth hath slain† (Line 23)? Macbeth told them already what went on, but they were still discussing it because apparently Macbeth didn’t convince them much. It is ironic because Macbeth was the one who killed both King Duncan and the grooms.

Computer Components and Latest Devices - 2431 Words

1.0 INTRODUCTION Science and technology constantly evolving and changing. The latest released product will surpassed the earliest. The earliest will only become a history. Therefore, computer scientist are striving to develop and finding the newest and ideal to fulfill the need of users. This assignment aimed to identify the computer components, its function, its importance as well as the latest and the future technologies of the pointing devices, central processing unit (CPU), memory, disk controller, disk, and monitor. 2.0 POINTING DEVICES Pointing device is an input devices that is used to allow user to input data to a computer. It is connected to the computers or laptops using a USB, PS/2, serial, or Bluetooth connection (Tyler,†¦show more content†¦The Magic cube however is android and iPhone compatible because it combines mouse, keyboard, and handwriting recognition functionality. It has the potential in the future to be easily customized to different layouts. Beside that, the Leap Motion Controller can be used by using finger and hand movements in the air to communicate with the computers and the other devices (Anand, 2013). Currently computer scientist have been working on 3D computer screens that react to the users hand moving behind the monitor display (BBC, 2013). The 3D monitor screens enable users to reach in, touch and interact with the objects inside the display. They believes the 3D screens will breakdown boundaries and make the digital experience feel more real. For the future used, many computer scientist is now conducting research in searching a new ways to interact with computers (Graham-Rowe, 2011) include voice control, gesture control and eye controlled gaze, emotionally intelligent interface (Rubens, 2012). 2.0 SIX COMPONENTS OF A COMPUTER CPU is the heart to any computing system (Posinasetti, n.d.). It also known as processor which is the center of all activities responsible for changing raw data into the required information inside the computer. The function of CPU is to execute the stored software instructions, turning data into information. Users are able to communicate with CPU through input devices (Marini et al, 2012). As integrated part of CPU, memory isShow MoreRelatedComputer Numerical Control Machines763 Words   |  3 Pages Computer Numerical Control (CNC) machines Introduction Computer Numerical Control machines (aka CNC) is automatic milling machines that produce industrial components without human support. They utilize pre-programmed set of commands that are sent to an internal computer, which facilitates industrial units to manufacture parts precisely and rapidly. There are various types of CNC machines from drills to plasma cutters available in the market to manufacture extensive range of components. HoweverRead MoreThe latest open source software available and the latest development in ICT1048 Words   |  5 Pages CONTENT 1.0 Introduction 1.1 Meaning of :-open source software -hardware - software 2.0 The Latest Open Source Operating System(OS) 2.1 Meaning of Open Source OS 2.2 Examples of Open Source OS 3.0 The Latest Open Source Application Software 3.1 Meaning of open source application software 3.2 Examples of open source application software 4.0 The Latest Development in ICT 4.1 Hardware 4.2 Software 5.0 Pervasive Computing 5.1 Meaning of pervasive computing 5.2 ExamplesRead MoreApplication Of A Technical Document1463 Words   |  6 PagesThe purpose of this technical document is to provide guidance to customize a personal computer. It is targeted for those individuals with a minimal knowledge about components of a computer but also extends up to students, faculties, and staffs who relies on their PCs to perform their everyday tasks. This design report is inspired by the fact that most of the computers available in the market today are not a perfect fit to a specific user’s application and are very expensive. Therefore, this documentRead MoreDesktops And All Of One Pcs Essay1566 Words   |  7 PagesPersonal Computers Figure 3: J McArthur, (2014), All in One PC [ONLINE]. Available at: http://www.techreviewer.co.uk/2015-time-to-kiss-your-desktop-goodbye/ [Accessed 9 November 2016]. Desktops and All in One PCs Next, desktops are electronic computer systems that stay in one location for quite a while and only moved if needed to reduce space, the whole reason they are justified as desktop personal computers is they stand statically on top of a desk hence the identity. Desktops can be categorisedRead MoreCurrent and Future Development of Open Source Software and Latest Development in ICT1141 Words   |  5 Pagesof Open Source Software and Latest Development in ICT Name: IC Number: Group Member: Muhammad Fauzi Bin Mohd Eshar (961226-14-5417) Ismail Bin Abdul Mutalib (960409-02-5165) Teacher Name: Fatimah Binti Ismail Content 1.0  Ã‚  Ã‚  Introduction 2.0   Ã‚  Ã‚  The Latest Open Source Operating System (OS) 2.1  Ã‚  Ã‚  Meaning of Open Source OS 2.2   Ã‚  Ã‚  Examples of Open Source OS 2.2.1  Ã‚  Ã‚  Linux 2.2.2  Ã‚  Ã‚  Kubuntu 3.0   Ã‚  Ã‚  The Latest Open Source Application SoftwareRead MoreAdvantages and Disadvantages of Using Computers. Summary1083 Words   |  5 Pagesintroduction to computer Chapter 1 A meaning of computer A Computer is an electronic device, operating under the control of instructions stored in its own memory There are three process of computer 1. Collects data (input) 2. Processing 3. Produces information (output) The Components of a Computer A computer contains many electric, electronic, and mechanical components known as hardware. There are five type of the components of computer. 1.Input Devices is any hardwareRead MoreHistory Of Computers During World War II948 Words   |  4 PagesHistory of Computers Introduction In today’s modern world, it’s hard to imagine life without computers. Throughout the decades, computers have gotten better, faster, and smaller. It’s hard to imagine that before the 20th century almost all calculations were done by mechanical devices such as the electromechanical computers; or, the first digital computers that had huge tubes around them that you had to designate a whole room just to fit the computer in. Today we have Internet, phone book, picturesRead MorePrinciples Underlying Operating System ( Os )1586 Words   |  7 PagesPrinciples Underlying Operating System: An Operating System (OS) is a manager which manages hardware and software components and makes them usable to the end user. There are many operating systems available to use such as Windows, Android, Linux and Apple OS. All operating systems (OS) are designed with some fundamental principles keeping in mind. Every operating system makes the hardware to be used and generating high performance. Security is one of the fundamental principles which have to beRead MoreComparison of Mac Vs. PC Essay1002 Words   |  5 Pageshardware and the operating system. The hardware of the computer is basically all the key components that composes a computer. Basically, the four key components of computer to analyze is the CPU which is the brain of the computer, the motherboard which the heart of the computer, the RAM which is the memory processing device, and the graphics card which generates images onto the monitor. In addition to the computer hardware, the next part of the computer to analyze is the operating system. Worldnetweb definesRead MoreThe Mobile Operating System And How It Is Different From Desktop Operating Systems Essay1444 Words   |  6 PagesAbstract iOS is a mobile operating system designed by Apple Inc. to support Apple devices such as iPhone, iPad, and iPod. iOS provides various features including security and inbuilt iCloud. In this research paper, we are going to study the overview of the mobile operating system and how it is different from desktop operating system. Then, we are going to explore iOS operating system on various bases such as different layers of iOS, iDevices, its features, security and its limitations. Introduction