ISSN:
1467-6281
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Economics
Notes:
Various studies consider the ex ante (pre-decision) or ex post (post-decision) uses of accounting information (e.g., Demski, 1974; Beaver and Demski, 1979; Beaver, 1981). Although these uses are distinct conceptually, the same information can be pertinent to both uses in multiperiod settings (see, e.g., the discussion in Demski, 1974). Also, several manuscripts (e.g., Beaver and Demski, 1979; Beaver, 1981; Vickrey, 1984; Miller and Rock, 1985) suggest that the abnormal security returns related to earnings can be partial functions of both ex ante probability revision and ex post state revelation in multiperiod settings. This article demonstrates that if the ex ante and ex post uses of information are linked empirically, then the returns/earnings studies may have: (a) misconstrued the usefulness of earnings, and (b) ignored the separate issues of the usefulness of earnings in ex ante probability revision and in ex post state revelation. It should aid in eliminating these deficiencies by motivating returns/earnings studies that investigate the extent to which the abnormal returns related to earnings are partial functions of ex ante probability revision and ex post state revelation. Studies of this type have great potential for enhancing our understanding of the effects of earnings.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/j.1467-6281.1995.tb00358.x
