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Discussion of "Are special items informative about future profit margins?"

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  • Richard Frankel

    (Washington University in St. Louis)

Abstract

Fairfield et al. (Rev. Account. Stud., 2009. doi: 10.1007/s11142-009-9084-9 ) explore the predictive power of current special items for future profit margins over various forecast horizons. They also provide evidence on how this predictive power varies with current core profit margins. I discuss the motivation for this research and conclude that I am unable to attach a coherent economic story to these results.

Suggested Citation

  • Richard Frankel, 2009. "Discussion of "Are special items informative about future profit margins?"," Review of Accounting Studies, Springer, vol. 14(2), pages 237-245, September.
    • Handle: RePEc:spr:reaccs:v:14:y:2009:i:2:d:10.1007_s11142-009-9091-x
    DOI: 10.1007/s11142-009-9091-x
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    References listed on IDEAS

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    1. Richardson, Scott A. & Sloan, Richard G. & Soliman, Mark T. & Tuna, Irem, 2005. "Accrual reliability, earnings persistence and stock prices," Journal of Accounting and Economics, Elsevier, vol. 39(3), pages 437-485, September.
    2. David Burgstahler & James Jiambalvo & Terry Shevlin, 2002. "Do Stock Prices Fully Reflect the Implications of Special Items for Future Earnings?," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 40(3), pages 585-612, June.
    3. Elliott, JA & Hanna, JD, 1996. "Repeated accounting write-offs and the information content of earnings," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 34, pages 135-155.
    4. Collins, Daniel W. & Maydew, Edward L. & Weiss, Ira S., 1997. "Changes in the value-relevance of earnings and book values over the past forty years," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 39-67, December.
    5. Mark T. Bradshaw & Richard G. Sloan, 2002. "GAAP versus The Street: An Empirical Assessment of Two Alternative Definitions of Earnings," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 40(1), pages 41-66, March.
    6. Patricia M. Fairfield & Karen A. Kitching & Vicki Wei Tang, 2009. "Are special items informative about future profit margins?," Review of Accounting Studies, Springer, vol. 14(2), pages 204-236, September.
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    Cited by:

    1. Theodore E. Christensen & Kenneth J. Merkley & Jennifer Wu Tucker & Shankar Venkataraman, 2011. "Do managers use earnings guidance to influence street earnings exclusions?," Review of Accounting Studies, Springer, vol. 16(3), pages 501-527, September.

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    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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