金融Essay怎么寫：The Strengths and Weaknesses of the 1968 'Ball and Brown' Study

本文是金融專業(yè)的留學生Essay范例，題目是“The Strengths and Weaknesses of the 1968 'Ball and Brown' Study（1968年“鮑爾和布朗”研究的優(yōu)缺點）”，隨著跨國公司的興起和跨國投資的快速增長，對會計收益數(shù)字的實證評價的需求越來越大。這是一個廣泛的研究領(lǐng)域，起源于鮑爾和布朗研究的開創(chuàng)性出版物(1968年)。文獻增長迅速，在過去的三十年里，在領(lǐng)先的會計和金融學術(shù)期刊上發(fā)表了超過1000篇論文(Kothari,2001)。然而，一些會計專家認為，Ball和Brown的研究存在一些不足之處。與此同時，批評人士認為，他們的實證評價促成了積極會計理論，這一理論在20世紀70年代末徹底改變了會計文獻。本文的目的是介紹鮑爾和布朗的論文的優(yōu)勢，并確定其對會計發(fā)展的影響。本文認為，這篇論文的局限性并不嚴重，但它的優(yōu)勢是非常顯著的。首先，討論了支持和反對實證研究的論點。最后，給出了結(jié)論。

With the rise of multinational companies and the rapid growth of transnational investments, there has been an increasing demand for an empirical evaluation of accounting income numbers. This is a broad area of research that originated with the seminal publication of the Ball and Brown study(1968).The literature has grown rapidly, with over 1,000 published papers in leading academic accounting and finance journals in the past three decades (Kothari,2001).However, several accounting experts assert that there are some weaknesses in the research of Ball and Brown. Meanwhile, critics argue that their empirical evaluation contributed to the positive accounting theory that revolutionized accounting literature in the late 1970s. The purpose of this essay is to introduce the strengths of Ball and Brown’s paper and identify its influence on the development of accounting. This essay will argue that the limitation of the paper is not serious, but its advantages are very significant. First, arguments for and against the empirical research are discussed. Then, an evaluation is explored .Lastly, a conclusion is presented.

The weaknesses of the paper

Providing empirical evidence to ascertain whether accounting numbers contain or convey information about a firm’s financial performance was the major motivation that led to the research of Ball and Brown (1968). They pioneered capital markets research in accounting. However, their study still has some weaknesses.

Unreliability不可靠

As a potential limitation of their studies, the reliability of their results depends on the sources of information. Although we are not disputing the reliability of the said sources, they should be investigated. Research should be conducted to document various types of institutions. According to Zhang (2007), the selection of the sample did not include companies meet the following four conditions. The first one is the failed company. The second one is a company whose financial year does not end on the 31st of December. The third one is the company that is not recorded in the CRSP database of stock price research centers. It also includes the young firm that is not described by the Wall Street Journal. Given those situations, the generality and reliability of their results may be reduced.

作為他們研究的一個潛在限制，他們的結(jié)果的可靠性取決于信息來源。雖然我們不懷疑上述消息來源的可靠性，但應該對它們進行調(diào)查。應該進行研究，記錄各種類型的機構(gòu)。根據(jù)Zhang(2007)，樣本的選擇不包括滿足以下四個條件的公司。第一個是失敗的公司。第二個是一個公司的財政年度沒有在12月31日結(jié)束。第三種是股價研究中心的CRSP數(shù)據(jù)庫中沒有記錄的公司。它還包括《華爾街日報》沒有描述的這家年輕公司。在這些情況下，其結(jié)果的普遍性和可靠性可能會降低。

Limitations

This research firmly establishes that earnings reflect some of the information in security prices. However, this early research did not perform statistical tests comparing alternative performance measures, considering that the primary concern was to ascertain whether there is any overlap between the earnings information and the information reflected in security prices.

In the 1980s, several studies statistically compared stock returns with earnings, accruals, and cash flows (Rayburn, 1986). Aside from providing a formal test, the previous research used a relatively crude measure of cash flow. The succeeding studies used more sophisticated expectation models to isolate accurately the unexpected components of earnings, accruals, and cash flows, given that returns in an efficient market only reflect the unanticipated components (Livnat et al., 1990).ListenRead phonetically

在20世紀80年代，有幾項研究對股票回報率與收益、應計收益和現(xiàn)金流進行了統(tǒng)計比較(Rayburn, 1986)。除了提供一個正式的測試外，先前的研究使用了一種相對粗糙的現(xiàn)金流測量方法。后續(xù)的研究使用更復雜的預期模型來準確地分離收益、應計利潤和現(xiàn)金流的意外成分，因為在有效市場中，收益只反映意外成分(Livnat et al.， 1990)。ListenRead語音學上

The strengths of the paper

Although the weakness of this paper is obvious, the design of variables and the results of the test have made outstanding contributions to research of accounting income.

Ingenious design of variables巧妙的變量設(shè)計

After identifying the research themes, Ball and Brown selected the most representative accounting income numbers to measure the information content. Considering that shareholders are more concerned about EPS and net income, Ball and Brown used them as variables. To determine the information content of the accounting income, they used market efficiency hypothesis and the capital asset pricing model as references.

在確定了研究主題后，Ball和Brown選擇了最具代表性的會計收入數(shù)字來衡量信息內(nèi)容?？紤]到股東更關(guān)心每股收益和凈收入，Ball和Brown將其作為變量。為了確定會計收入的信息內(nèi)容，他們借鑒了市場效率假設(shè)和資本資產(chǎn)定價模型。

According to the efficient market hypothesis, the authors maintained that observable stock price is fluctuant and linked with information. This can mean that accounting income numbers are useful. The key to determining the relationship between accounting income and stock price is to distinguish the security prices of a particular company as well as all the other companies. Therefore, the authors built two models of market expected return to examine how the market reacts to accounting income numbers.

Ball and Brown separated factors that affect earning into two different kinds: specific factors and system factors. System factors affect all companies, thus, the surplus of one company and other companies can be linked with each other. If the link is suitable, then stability can be shown using a fixed function, enabling us to achieve the income conditional expectation of one company based on other companies’ data. Thus, changes in the unexpected surplus of earning can be estimated by calculating by the changes in both actual income and conditional expectation. The authors defined the difference as the gain of current information. At the same time, they assumed that the changes in policy and corporate have been enacted before the first estimation. Thus, the influence of macroeconomic and policy changes can be estimated jointly.

The authors initially used the Ordinary Least Squares (OLS) to estimate the linear regression coefficient and intercept of samples’ annual income changes and average income changes. Secondly, the changes in the market income average were used as independent variables and included in the regression model to calculate the expected value of income changes. Finally, the changes in the value of unexpected earnings (prediction residual) referred to the actual value of the earnings change minus the change in earnings expectations. Therefore, market effect was removed from the estimation of expected surplus, which means the authors did not take system factors into account.

作者首先使用普通最小二乘(OLS)估計樣本年收入變化和平均收入變化的線性回歸系數(shù)和截距。其次，將市場收入平均值的變化作為自變量，納入回歸模型，計算收入變化的期望值。最后，預期收益價值的變化(預測剩余)是指收益變化的實際價值減去收益預期的變化。因此，在預期盈余的估計中剔除了市場效應，即沒有考慮制度因素。

Similarly, the factors affecting the impact of no stock or stock returns can still be separated into two factors: system factors and specific factors. First, the authors used capital asset pricing model to separate the system factors and from non-system factors, then calculated the deviation of actual rate return and expected stock return. Secondly, Ball and Brown calculated the company’s stock return residuals (abnormal returns). Given that markets are efficient, stock prices will adjust quickly and effectively about the new information, so residuals can show the impact on stock prices of new information. To test the validity of statistics, Ball and Brown used an alternative model- naive model. In this model, an alternative variable is the expected surplus for last year’s actual surplus. The naive model does not eliminate the market effects, but verifies the earnings per share targets.

Remarkable results成果顯著

This paper distinguished expected changes and unexpected changes in accounting incomes to estimate the abnormal return and changes in unexpected accounting incomes. In addition, it theorized that when the surplus prediction error is negative, it is both advantageous and disadvantageous. This paper presented the hypothesis that if the accounting income numbers could be linked with stock prices, then the announcement of accounting income numbers could result in changes in the stock returns. In the empirical test, the authors defined the month of annual report as 0, API representing the abnormal performance index of month M. In the process of calculating the API, the changes in unexpected earning are first separated into two groups (positive and negative), and then all samples are calculated together. Ball and Brown thought that if accounting income is related to stock returns, it can be assumed that if the changes in unexpected surplus are positive, then API is larger than 1 ; if they are negative, then the API is less than 1. In the combined sample, API is close to 1.

本文區(qū)分了會計收入的預期變動和意外變動，以估計會計收入的異常收益和意外變動。此外，還提出了當盈余預測誤差為負時，既有利又不利的理論。本文提出假設(shè):如果會計收益數(shù)字與股票價格掛鉤，則會計收益數(shù)字的公布會導致股票收益的變化。在實證測試,作者定義了月的年度報告為0,API代表月m .異常性能指標的計算過程中API,意想不到的收入的變化首先分為兩組(積極的和消極的),然后計算所有樣本都在一起。Ball和Brown認為，如果會計收入與股票收益相關(guān)，則可以假設(shè)，如果意外盈余的變化為正，則API大于1;如果它們是負的，那么API小于1。在合并后的示例中，API接近于1。

Ball and Brown thought that annual income report can provide new information; however, it cannot be transmitted in time, because most of its content comes from various sources (interim report and non-accounting information, annual accounting report is only one of them) .The authors also found that after the announcement of the annual report, API has a tendency to drift on, that is, revenue projections’ residual error signal and the relationship between stock returns in the annual report may be continued for two months. After analysis, which may be caused by the transaction costs, and excluding the impact of transaction costs, the market reaction to the numbers tends to be unbiased.

Evaluation評價

At first glance, one weakness of this empirical research is the limitation of the sample which may decrease the generality and reliability of the results. However, the selection of the sample was similar to the tests used in related literature, which could lead to consistent results if used the same way on other samples.

乍一看，本實證研究的一個弱點是樣本的局限性，這可能會降低結(jié)果的普遍性和可靠性。但是，樣本的選擇與相關(guān)文獻中使用的測試相似，如果對其他樣本使用同樣的方法，可能會導致一致的結(jié)果。

The weaknesses of the paper also include the limitation of the statistical tests. Nonetheless, it had a significant impact on later research. Ball and Brown (1968) provide compelling evidence that there is information content in accounting earnings announcements. In the meantime, they correlate the sign of the abnormal stock return in the month of an earnings announcement with the sign of the earnings change of a certain firm’s earnings in a previous year earnings. Starting with Ball and Brown (1968), many studies used such association with stock returns to compare alternative accounting performance measures, such as historical cost earnings, current cost earnings, residual earnings, operating cash flows, and so on. Circumstances similar to those that facilitated the Ball and Brown (1968) study also contributed to Watts and Zimmerman’s positive accounting theory that revolutionized the accounting literature in the late 1970s (Watts and Zimmerman, 1979). As Watts and Zimmerman (1986) point out, most accounting research since Ball and Brown (1968) has been positive, and the role of accounting theory is no longer normative.

Ball and Brown (1968) heralded the positive-economics-based empirical capital markets research in the late 1960s.Concurrent developments in economics and finance constituted the theoretical and methodological impetus

to the early capital markets research in accounting. This historical detour exploring the forces that shaped the early capital markets research has positive pedagogical externalities, particularly for guiding new researchers. Seasoned researchers can skip over portions of this section without losing continuity.

對早期資本市場會計的研究。這種探索形成早期資本市場研究的力量的歷史迂回具有積極的教學外部性，尤其是對指導新研究人員。經(jīng)驗豐富的研究人員可以跳過這一部分而不失去連續(xù)性。

In addition, this paper analyzes the insufficiency of theoretical studies using empirical testing to find out whether the accounting income numbers are useful. It initially provides reliable evidence that stock markets can influence annual reports. Then researchers began to do a lot in reflect of stock market. Furthermore, the method used is also applicable to a large number of accounting and financial issues, including dividend announcements, earnings announcements, mergers and acquisitions, and investment spending.

Conclusion結(jié)論

This essay has discussed the weaknesses and strengths of the empirical evaluation of accounting income numbers by Ball and Brown (1968). Although this research has some limitations, the merits far outweigh the disadvantages. It preceded the positive-economics-based empirical capital markets research of the late 1960s. Concurrent developments in economics and finance constituted the theoretical and methodological impetus to the early capital markets research in accounting. Therefore, it is suggested that this research plays a great role in the development of accounting .In this essay, only a few strengths are mentioned; the ways of putting these benefits into practice need further exploration.

本文討論了Ball和Brown(1968)對會計收入數(shù)字的實證評價的優(yōu)缺點。雖然本研究有一定的局限性，但利遠大于弊。它先于上世紀60年代末基于實證經(jīng)濟學的實證資本市場研究。經(jīng)濟學和金融學的同步發(fā)展為會計早期資本市場研究提供了理論和方法上的推動力。因此，這一研究對會計的發(fā)展起到了很大的作用。如何將這些好處付諸實踐還需要進一步探索。

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