Empirical Research in Accounting (for PhD Student)
Alzahra University
(Semester 89-1)
Professor: Ali Rahmani (PhD)
Office: Railroad Buildings (West door)
E-mail: [email protected]
Office Hours: By appointment
Class: 8- 11 a.m. Tuesday
Introduction
The primary objective of this course is to develop a broad understanding of empirical
accounting research in financial reporting. The intent is to focus the student on the
classics to provide a background and current research with focus on the type of questions
and innovative methods that accounting academics are currently pursuing and developing.
A second objective is for student to complete a substantial research project that may lead
to publishable work and a basis for a dissertation.
This course is a survey of empirical-archival research in accounting, primarily financial
accounting. There are three main learning purposes that we want to accomplish.
First, by the end of the class you should understand some of the topics that have been
studied, especially in financial accounting, over the recent years. Nearly all of the papers
we will read in the class have been published in a top accounting journal during that
period, or are currently active working papers. On the other hand, there are many topics
we will not have time to cover and we will cover no topic in depth.
Second, by the end of the class you should be better able to critically evaluate empiricalarchival research by asking the right questions to identify the limitations of research
papers. Being able to identify weaknesses in others’ and your own studies is a skill that
you will use throughout your career.
Finally, by the end of the semester you should be better able to identify possible
extensions to papers that you read. Obviously, this is also an important skill, being able
to identify new research issues that build upon published work.
We will work on these three objectives every class session on every paper.
Course Materials
Electronic copies of all papers will be provided to you by e-mail. The readings are
selected to give a balanced coverage of both the development of the major areas of
empirical research in financial accounting, and the principal current controversies in those
areas.
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Weekly Assignments
Each class session we will read two to four research studies. For each study, students will
assume one or more of three roles. Each role has both a written component and an oral
in-class component. The roles are (a) to summarize, (b) to critique, and (c) to extend.
One student will be assigned to the first two roles for each paper, and one student will be
assigned to the third role for each session.
There will be no restriction on bilateral trading in reading assignments. Please let me
know about trades.
However, all students are expected to contribute to all three parts of the discussion
regardless of whether they have been assigned that role specifically.
Summarize – The purpose of this role is to start the paper by providing a brief overview.
The in-class component is to spend three to five minutes (no more than five) summarizing
the paper. This summary should include a clear statement of (a) the research issue, (b)
the motivation, (c) primary research method, (d) the analysis that was conducted, (e) the
data that were used and (f) the conclusions that were reached, and (g) the contribution.
The purpose of this role is to put the paper in its best possible light. If the authors did a
poor job of explaining their paper, you should do a better job. If you don’t believe the
results you should still faithfully report what the authors concluded. You do not need to
defend the authors’ positions, but you need to faithfully report them. The written
component for this role is a maximum two-page summary of the comments made in class
(double-spaced, normal fonts and margins). The summary should be in the form of
narrative text without headings or bullet points that on its own can communicate the
essence of the paper to a knowledgeable reader (another doctoral student) who has not
read the paper.
Critique – The purpose of this role is to critically evaluate the paper. We want to
identify the strengths of the paper to convince ourselves that the results are credible and
to add to our understanding about how to conduct a credible study ourselves. We want to
identify the weaknesses of the paper to challenge the credibility of the results in the paper
so that we can avoid similar mistakes in our own work and get better at identifying them
in the work of others. The in-class component is to sequentially raise issues for
discussion as you are called upon. These issues should be organized from most important
to least important, and can be either particular strengths or weaknesses of the paper. To
identify these issues you should ask yourself the following questions:
- Is the research issue clear, interesting, and well-motivated?
- Is the research design appropriate to the question and well-executed?
- Are the data appropriate to the analysis (i.e. valid measures of the constructs)?
- Are the inferences appropriate for the empirical results?
You can view your role as providing feedback to the authors of the paper on what part of
the paper they have done well and what part can be improved. The written component for
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this role is a maximum of two pages (double-spaced, normal fonts and margins) that
discusses one or two of the most important weaknesses that you identified in the paper.
You should describe the problems, their implications for the results of the study, and
either suggest solutions or discuss the challenges the authors would face in addressing the
issues. Your audience is other knowledgeable readers (other doctoral students) who have
read the paper you are critiquing.
Extend – The purpose of this role is to suggest ways in which the paper can be extended.
The in-class component is to sequentially raise possible extensions of the research in the
paper as you are called upon. These possible extensions should be organized from most
interesting/executable to least interesting/executable. To identify these issues you should
first ask yourself the following questions:
- What is the “next thing” we would like to know?
- Can the methodology used in the study be improved?
- Can the data used in the study be improved?
In addition, you should consider the following questions:
-Are there unique data in this study that can be used for a different issue?
- Can this research methodology be used for a different issue?
The objective here is not a shotgun of ideas that comes from 15 minutes of brainstorming.
The best outcome would be one interesting idea that leads you to actually write a
publishable paper. The written component for this role is a maximum of two pages
(double-spaced, normal fonts and margins) that discusses the single best idea for
extending the research area that is the topic of discussion in class that day. Your
suggested extension may relate directly to one of the papers discussed in class that day, or
to a combination of the two papers discussed, or to the general research area that spans
the two papers. You should clearly describe the research question, why it is important,
and how you would address it. Your audience is other knowledgeable readers (other
doctoral students) who have read the two papers whose research area you are extending.
Larger Assignments
Referee Report –I will provide you with an anonymous draft of a paper. You will be
required to write a review of this paper and submit it to me in class on Azar. A review
combines the roles of summarizing (very briefly) and critiquing, so you will have had lots
of practice at this by Azar.
Literature Review – You will be asked to write a research paper for this class, but we
will do it in stages. The literature review is the first stage. This assignment gives you the
opportunity to read in greater depth in a topic of interest to you. Your topic may be
related to readings on the syllabus or may be in an area not covered on the syllabus. I
expect you to identify at least five papers that are related to each other and provide a
critical summary of their conclusions. The papers you are summarizing must be approved
by me in advance. You should provide me with a list of the papers no later than Aban 11.
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You are welcome to seek my approval earlier if you wish to begin the paper earlier. The
summary should be five to seven pages (double-spaced, normal fonts and margins), and is
due on Azar 16.
Research Paper – This research paper should be based on the literature review you
previously completed. You are to determine a very specific extension of that literature to
a new research question. Extensions that involve improving on the data or method are
permitted, but extensions that identify the “next thing we want to know” are preferred.
This draft should include your revised literature review, expanded by adding an
introduction, hypothesis development, and methodology sections. This paper should be
no more than 20 pages (double-spaced, normal fonts and margins), and is due on Day
17th (January 6th) at 5pm.
Class Participation
In this class we are more of a learning community than we are students and teacher. I will
probably learn more during the semester than anyone else, but I hope we all learn a great
deal. A good participant is clarifying their own learning while they enhance the learning
of others. Each session, several of you will be assigned that day’s roles (summarize,
critique, extend). Your performance in that capacity will be part of your class
participation grade. Beyond that, I expect that all students will contribute to the
critiquing and extending roles even though only one or two students are formally
responsible for these roles.
Class Sessions
We will begin each class session with an oral summary of paper A. I will then ask the
person(s) assigned to critique paper A to raise their single most important point. This
point may be either a strength or weakness. We will discuss this point and then move to
the critiquing student’s next point. It is the responsibility of those assigned to critique the
papers to keep the conversation focused on what they think is the most important issues.
We will then repeat this process for paper B. After we have discussed the strengths and
weaknesses of both papers we will turn to the student assigned to extend the research.
We won’t stick to a rigid schedule, but I expect that in general we will have five minutes
of summary of paper A, followed by an hour of discussion, then five minutes of summary
of paper B, and followed by an hour of discussion. If we take a break between the two
papers we should still have 30 to 40 minutes to discuss extensions.
Grades
Grades for the course will be determined on the basis of the following assignments and
weights.
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Grading Summary
Assignments
Points
Percent
Referee Report
2
10%
Literature Review
2
10%
Research Paper
4
20%
Class Participation
2
10%
Weekly Writing
4
20%
Final Exam
6
30%
Total
20
100%
Scholastic Dishonesty
Discussion of the course outside of class is strongly encouraged. For all written
assignments, students may share ideas but they should NOT share ANY electronic or
paper documents. In addition, when borrowing ideas or words from any allowable
source, that source should be appropriately cited.
Detailed Schedule (Tentative)
Session
Date
Topic/Papers
1
30/6
Introduction to Empirical Research
How to Read a Research Paper:
1. Zucca & Campbell, 1992, A Closer look at Discretionary writedowns of impaired Assets, Accounting horizons, September, p30-41.
2
6/7
3
4
13/7
20/7
Research Design:
2. Kinney, 1986, Empirical Accounting Research Design for Ph.D.
Students, The Accounting Review, no. 2, p338-350
Market-Based Research I:
1. Beaver, 1996, Directions on Accounting Research: NEAR and FAR,
Accounting horizons, vol. 10, no 2, p 113-124.
2. Beaver, 2002, Perspectives on Recent Capital Market Research, The
Accounting Review, vol. 77, no 2, p453-474.
3. Ball, R. and P. Brown, 1968, An Empirical Evaluation of Accounting
Income Numbers, Journal of Accounting Research (autumn), p159177.
Market-Based Research II:
1. Kothari, 2001, Capital markets research in Accounting, Journal of
Accounting and Economics, no31, p105-231.
5
Session
Date
5
27/7
6
4/8
7
11/8
8
15/8
Topic/Papers
2. Lee, 2001, Market Efficiency and Accounting Research, A
Discussion of “Capital Market Research in Accounting” Journal of
Accounting and Economics, no31, p 233-253.
Market-Based Research III:
1. Raja, Clement Sudhahar & Selvam, 2009, Testing the Semi-Strong
form Efficiency of Indian Stock Market with Respect to Information
Content of Stock Split, International Research Journal of Finance and
Economics, Issue 25,p7-20.
2. Song , Thomas & Yi, 2010, Value Relevance of FAS No. 157 Fair
Value, Hierarchy Information and the Impact of Corporate
Governance Mechanisms, The Accounting Review, vol. 85, no 4,
p1375-1410
3. Lev & Ohlson, 1982, Market- Based Empirical Research in
Accounting: A Review, Interpretation, and Extension, Journal of
Accounting Research, vol. 20, p249-322.
4. Beaver, 1982, A Discussion of Market- Based Empirical Research in
Accounting: A Review, Interpretation, and Extension, Journal of
Accounting Research, vol. 20, p323-331.
Market-Based Research V:
1. Barth & Clinch, 2009, Scale Effects in Capital Markets-Based
Accounting Research, Journal of Business Finance and Accounting,
Vol. 36, Issue 3-4, , April & May p 253–288.
2. Jiang and Shen, 2009, Discussion of Scale Effects in Capital
Markets-Based Accounting Research, Vol. 36, Issue 3-4, April & May,
p 289–296.
3. Easton & Sommers, 2003, Scale and scale effects in market-based
accounting research, Journal of Business Finance & Accounting,
January, p.25-56.
4. Harrison, Tomassini & Dietrich, 1983, The Use of Control Groups in
Capital Market Research, Journal of Accounting Research, vol21, no1,
p65-77.
Financial Reporting & Disclosure I:
1. Ball and Foster, 1982, Corporate Financial Reporting: A
Methodological Review of Empirical Research, Journal of
Accounting Research, vol20, p161-234.
2. Jensen, 1982, Discussion of Corporate Financial Reporting: A
Methodological Review of Empirical Research, Journal of
Accounting Research, vol. 20, p239-244.
3. Gonedes, 1982, Discussion of Corporate Financial Reporting: A
Methodological Review of Empirical Research, Journal of
Accounting Research, vol20, pa235-238.
4. Ball and Foster, 1982, A Reply, Journal of Accounting Research,
vol20, 245-248.
5.
Financial Reporting & Disclosure II:
1. Fields, Lys & Vincent, 2001, Empirical Research on Accounting
Choice, JAE Rochester Conference April 2000 .
6
Session
Date
9
25/8
10
2/9
11
9/9
12
16/9
13
23/9
14
30/9
Topic/Papers
2. Francis, 2000, Discussion of Empirical Research on Accounting
Choice, JAE Rochester Conference April 2000.
Financial Reporting & Disclosure III:
1. Healy & Palepu, 2000, A Review of the empirical disclosure
literature, JAE Rochester Conference April 2000.
2. Boutant, J. (2010) Determinants of discretionary accounting choices:
empirical evidence from French mergers, 33th annual congress of
European Accounting Association conference, Istanbul.
Financial Reporting & Disclosure V:
1. Choi, Myers, Zang & Ziebart, 2010, The Roles that Forecast Surprise
and Forecast Error Play in Determining Management Forecast
Precision, Accounting Horizons, vol. 24, no 2, p165-188
2. Sun, 2010, Do MD&A Disclosures Help Users Interpret
Disproportionate Inventory Increases? The Accounting Review,
vol85, no4, p1411-1440.
3. Rowbottom & Lymer,2009,Exploring the Use of Online Corporate
Reporting Information, Journal Of Emerging Technologies In
Accounting, vol6, p27-44
Earning Management I:
1. Jones, Jennifer, 1991, Earning Management during Import Relief
Investigation, Journal of Accounting Research, vol29, no2, p193-228.
2. Stubben,2010, Discretionary Revenues as a Measure of Earnings
Management, The Accounting Review, vol. 85, no2, p695-717.
3. Bagnoli & Watts, 2010, Oligopoly, Disclosure, and Earnings
Management, The Accounting Review, vol85, no4, p1191-1214.
Earning Management II:
1. Fan, Barua, Cready & Thomas, 2010, Managing Earnings Using
Classification Shifting: Evidence from Quarterly Special Items, The
Accounting Review, vol85, no4, p1303-1323.
2. Barua, Lin & Sbaraglia, 2010, Earnings Management Using
Discontinued Operations, The Accounting Review, vol85, no5,
p1485-1509.
3. Badertscher, Phillips, Pincus & Rego, 2010, Earnings Management
Strategies and the Trade-Off between Tax Benefits and Detection
Risk: To Conform or Not to Conform?, The Accounting Review,
vol84, no1, p63-97.
Valuation:
1. Cready, 2010, The Persistence and Market Valuation of Recurring
Nonrecurring Items, The Accounting Review, vol85, no5, p15771615.
2. Begley & Feltham,2000, The Relation Between Market Values,
Earnings Forecasts, and Reported Earnings, Sauder School of
Business Working Paper
Intangibles:
1. Muhanna & Stoel, 2010, How Do Investors Value IT? An Empirical
Investigation of the Value Relevance of IT Capability and IT
7
Session
Date
Topic/Papers
Spending Across Industries, Journal Of Information Systems, vol24,
no1, p43-66.
15
7/10
Statistical Issues I:
2. Brown, Lo & Lys, 1999, Use of R2 in Accounting Research:
Measuring Changes in Value Relevance over the Last Four Decades,
Journal of Accounting and Economics, Vol.28, December, P83-115.
3. Espahbodi, 2000, On the Factors Influencing Return-Earnings
Relationship, www.ssrn.com.
Statistical Issues II:
1. Kothari & Warner ,2006, Econometrics of Event Studies, Handbook
of Corporate Finance: Empirical Corporate Finance, Volume A
(Handbooks in Finance Series, Elsevier/North-Holland), Ch. 1,
2. Aktas, Bodt & Cousin, 2003, Event Study under Noisy Estimation Period,
EFMA 2003 Helsinki Meetings.
Role Assignment:
Students:
1- Hamideh Asnaashari (HA).
2- Mojgan Robatmilee (MR)
3- Azam Valizadeh (AV)
4- Farzaneh Yousofi (FY)
Prof.: Ali Rahmani (AR)
I will present all of the papers other than assign to student.
Week
1
2
3
4
5
6
7
8
Paper
Zucca
Ball & Brown
Lee
Raja, et al
Song, et al
Barth & Clinch
Easton et al
Harrison, et al
Ball and Foster
Jensen
Gonedes
Ball and Foster
Fields
Summarize
Critique
Extend
HA
FY
AV
MR
HA
AV
FY
MR
AV
FY
MR
HA
All of Student
HA
FY
AV
MR
HA
AV
FY
MR
HA
AV
MR
FY
HA
MR
MR
FY
HA
AV
FY
MR
FY
8
9
10
11
12
13
14
15
Francis
MR
MR
AV
Healy & Palepu
Boutant
Choi et al
Sun
Rowbottom et al
Stubben
Bagnoli & Watts
Fan
Barua
Badertscher
Cready
Begley
Espahbodi
Kothari
AV
FY
HA
FY
AV
MR
HA
MR
AV
FY
AV
FY
HA
-
AV
FY
HA
FY
AV
MR
HA
MR
AV
FY
AV
FY
HA
-
MR
HA
MR
AV
FY
AV
FY
FY
HA
MR
MR
HA
MR
-
Aktas
9
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Detailed Schedule (Tentative)