Skittish investors will not be surprised to learn that the bottom line of a company's income statement fails to tell the whole story. New research by Jan Barton, an associate professor of accounting at Emory University’s Goizueta Business School, suggests that subtotals near the center of the income statement, such as operating income, have a much stronger association with contemporaneous stock returns than do the top-line and bottom-line numbers. In a paper entitled, “Which Performance Measure Attributes Do Investors around the World Value the Most—and Why?” slated for publication in The Accounting Review in May, Barton and co-authors Grace Pownall, professor of accounting and associate dean of the doctoral program at Goizueta, and Bowe Hansen of the University of New Hampshire, argue that no one single performance measure can serve as a Rosetta Stone for investors as they shop for stocks around the world. Still, Barton says, the research suggests that helpful metrics tend to be those that quickly and directly reflect information about a firm’s future cash flow. Does the Pursuit of Information and Its Presentation in Financial Statements Bias Investors?
As the New Year begins, investors and analysts eagerly await the release of 2009 year-end corporate financial statements. But exactly how do investors interpret the data, especially when some accounting entries are not provided on a consistent basis? In a research paper, William B. Tayler, assistant professor of accounting at Emory University’s Goizueta Business School, and a co-author note that information pursuit bias—specifically seeking out and needing to calculate results in a financial statement—can lead to weighting that information more heavily in the decision-making process. As the Dow Rises, Will Confidence in the Markets Persist?
On Oct. 14, the Dow Jones Industrial Average hit 10,000 and market-watchers were eager to interpret it as a sign that the U.S. economic recovery is gathering steam. But is the Dow's upward movement a reason for confidence, or do major obstacles still lie ahead? Financial experts at Emory University's Goizueta Business School acknowledge that domestic and international markets are rebounding, but caution it doesn't necessarily mean that good buys are to be had. The Relevance of Short-Selling and Weakened Margin Restrictions on the Market
In a recent research paper titled “Margin Trading, Overpricing, and Synchronization Risk,” William B. Tayler, assistant professor of accounting at Emory University’s Goizueta Business School, and co-authors take a critical look at short-selling, exploring how the weakening of margin restrictions to allow for more short-selling can drive up and further exacerbate overpricing in the market. But Tayler does contend that disciplining traders can be a difficult proposition, with efforts to reign in short-selling serving to delay the market’s inevitable corrections. Goizueta NYSE Euronext Panel Explores Financial Next Steps
A year has passed since the worst economic crisis since the 1930s crashed the global financial markets. Speculation abounds on when things will settle down and return to the new normal. On September 2, Larry Benveniste, dean of Emory University's Goizueta Business School, and Duncan L. Niederauer, CEO of the New York Stock Exchange Inc., teamed up to host a panel of business and political luminaries to explore lessons learned and contemplate the question, “Where Do We Go From Here?” Moderated by Susan Lisovicz, CNN’s primary correspondent on the stock market, the live, web-streamed discussion included Frank Blake, CEO, The Home Depot Inc.; U.S. Sen. Saxby Chambliss (R-Ga.); Daniel Amos, CEO, Aflac Inc.; and Atlanta Federal Reserve Bank CEO Dennis Lockhart. Buffett: Rock Star of American Capitalism
Warren Buffett, arguably the most successful investor alive, inspires tens of thousands of fans to travel to Omaha, Nebraska, each year to attend the annual shareholder meeting of Berkshire Hathaway. Little wonder that Alice Shroeder's insightful biography, "The Snowball: Warren Buffett and the Business of Life," has proved popular among readers. She explores the ways Buffett built his wealth, and also the reasons why he plans to give most of it away to charity. Can Companies Maintain Quality As They Cut Costs?
This week U.S. Federal Reserve Chairman Ben Bernanke announced that the "recession is very likely over." While there are indicators to suggest the American economy is in recovery, executives at most companies are still grappling with ways to manage costs. With 216,000 jobs shed in August, pushing the national unemployment to rate to 9.7%, cutting human capital clearly continues to be a primary method of cost reduction. But is it the best option? Faculty at Emory University and its Goizueta Business School say indiscriminate cuts can yield unintended consequences over the long term, and add that trimming away expenses instead of hacking at them may be a better strategy. Examining the Costly Lessons from Business Failures
Plenty of lessons can be learned from the glut of businesses that have fallen under the swift sword of a merciless recession. Yet according to authors Paul B. Carroll and Chunka Mui, executives continue to make the same mistakes that defeated their predecessors. In Billion-Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years, Carroll and Mui draw on research into more than 750 business failures to reveal the misguided tactics that mire companies. Risk, the Derivatives Market, & Proposed Regulatory Reforms: What's Ahead?
In a recent interview with Knowledge@Emory, Nicholas Valerio III, associate professor in the practice of finance at Emory University's Goizueta Business School, discusses the recent Department of Treasury reform proposals impacting derivatives, the problems with over-the-counter derivatives, the future of Wall Street, and two landmark books offering a helpful perspective on risk and the psychology of the market. Has Corporate Bankruptcy Become a Competitive Advantage?
Chrysler's 42-day trek through U.S. bankruptcy court allowed the American automaker to restructure and paved the way for today's sale of the bulk of its assets to Italy's Fiat. The alliance gives Fiat further entree into the American market and may also give it a competitive advantage. But is filing Chapter 11 always the best option? According to legal and finance experts at Emory University and its Goizueta Business School, the stigma of filing for bankruptcy is considerably less than it once was and there can be benefits to such a move. To remain viable though, companies still need a solid business plan.