The Finance Brown Bag Seminar is held by the Institute for Finance, Banking and Insurance (WU Vienna) and the Vienna Graduate School of Finance (VGSF). It serves as a presentation platform for PhD students, faculty members, and visitors. An overview of BBS on the website of the Institute for Finance, Banking and Insurance.
June 11th, 2019, 12:00-13:00, D4.4.008
Jack Stecher, Alberta School of Business
Title: "Coherent Classification and Signaling"
We investigate whether classifying line items as core earnings or as special items can signal their persistence. Although persistence is soft information, classifications inform investors, because it may be possible to confirm the ranking of items by persistence. If a firm respects persistence ranking in its classifications, we call the classifications coherent. We show that requiring coherence explains important empirical regularities: firms disproportionately classify losses as special items, and investors respond more to negative than to positive special items. Nevertheless, the classifications reveal as much information as possible. This suggests the harm to investors of classification shifting may be overstated.