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Accounting

Do SEC Rules on Insider Trading Really Protect?
Securities and Exchange Commission Rule 10b5-1, designed to keep permitted insider trades from hurting others in the market, may not be achieving its goal, says Alan Jagolinzer. (June 2007)

Understanding the Linkage Between ROI and the Economic Rate of Return
What does return on investment really mean? A new tool gives investors and managers help decoding the true economic profitability of a business based on reported accounting metrics. (January 2007)

Auctions May Simplify Internal Resource Allocation

Creating auctions within a corporation to let managers compete to buy necessary resources can be a boon to industry. But researchers, includingMadhav Rajan, warn that in some cases these internal markets may not benefit the bottom line.

Your Auditor's Other Clients Can Effect Your Stock Price
The stock price of a given firm varies based on the quality of audits of other firms in the client portfolio of its auditor, according to research co authored by the Business School's Anne Beyer.

Despite Uproar, European Investors Favor Global Accounting Standards
International accounting standards, designed to globally align corporate accounting practices, raised quite a stir when the European Union ordered publicly-traded firms to adopt them. Now researchers say European investors generally responded positively to the idea of replacing country-specific accounting rules with these new standards. (October 2006)

Excessive Executive Pay Makes Headlines, But So What?
The business press loves to expose stories of excessive executive compensation. Professor David Larcker says the media may single out egregious cases, but the unflattering publicity doesn't seem to make any difference in how firms pay those top executives. (February 2006)

Financial Statements Are Still Valuable Tools for Predicting Bankruptcy
Despite growing public skepticism over how useful financial statements are in providing information to investors, researchers at Stanford's Graduate School of Business have found that the value of financial ratios for predicting bankruptcy has not declined significantly over time. (November 2005)

Nonfinancial Data Can Predict Future Profitability
Looking at customer relationship metrics in conjunction with other financial measurements can forecast a financial profitability number for the coming year 15 percent closer to the actual figure, says accounting Professor Madhav Rajan. (November 2005)

The Bond-Rating System Isn't Broken, Say Researchers
Just days before WorldCom went bankrupt, Moody's rated the firm's stock "investment grade." This does not mean the current bond-rating system isn't working, say researchers. The rating was appropriate for Moody's specialized institutional clientele. (April 2005)

Smart Startups Don't Wait to Set Up Accounting Systems
A new study finds that young companies that acted quickly to institute formal accounting systems, such as operation budgets, cash budgets, and financial monitoring systems, had higher growth rates in terms of revenues and head count than their peers. (February 2005)

Use Weighted Averages to Determine Transfer Pricing
Transfer pricing, determining how to price goods shipped between related companies often in different countries, has long been debated by accountants and managers. Researchers now say that using weighted averages to determine prices can solve the dilemma. (October 2004)

Measuring Executive Accountability
Shareholders are demanding incentives to force executives to focus on creating corporate value. This trend may mean that managers are less willing to engage in projects that increase value way down the line, value that isn't measured—and therefore rewarded—now. (May 2002)

Following Analysts Advice Can Pay off
A study of accuracy and bias among securities analysts finds they are good at identifying mispriced stocks. Where they really add value is in analyzing small and medium sized companies where the market is slow to digest information. (March 1999)

Safe Harbor Law Boosts Corporate Disclosure
The so-called Safe Harbor Law, designed to protected executives who provide projections about their firm's behavior, has increase both the frequency of forecasts and the average number of forecasts issued. (May 1998)

The Trouble with Good News
The securities research analysts who advise your broker on the best stock market picks may not be trying to mislead you deliberately, but beware of their rosy attitudes. Research has turned up evidence that equity analysts' earnings forecasts are persistently overoptimistic. (June 1997)

Accounting for Toxic Cleanup
Corporations have long argued about how their books should reflect liabilities for Superfund Site cleanups. Two researchers say that investors are already discounting stocks known to have these liabilities. Providing more factual information could ultimately benefit stock prices. (February 1996)