EC5509: Some methods in accounting and finance

1. Event studies

2. Detecting earnings management

November 2011

Prof Len Skerratt


These two weeks of 5909 will concentrate on describing and evaluating some important methods in accounting and finance. First, event study methods which measure the share price impact of information being available to investors. Secondly, the measurement of earnings management in order to detect earnings quality - for example, one of the objectives of IFRS is to minimise accounting policy choices by companies and improve their earnings quality.


 Topic  Articles Lecture notes

Event studies

Lecture 11-1, LC117, Friday 18 November,

  • Ball & Brown, An empirical evaluation of accounting income numbers, Journal of Accounting Research, Autumn, 1968, 159 178. (The key reading)
  • Strong, Modelling Abnormal Returns, Journal of Business Finance and Accounting, June 1992 (for greater detail).

Earnings management

Lecture 11-1, H004, Friday 25 November

  • Dechow, Sloan & Sweeney, Detecting earnings management, Accounting Review, April, 1995. (The key reading)
  • Degeorge, Patel & Zeckhauser, "Earnings management to exceeds thresholds", Journal of Business, 1999, vol 72(1). (Another method of detecting earnings management)
 Workshop/seminar, LC111, 2-3, 25 November
  • Exercise (an xlsx file) to identify the announcement date