VGSF - WU Vienna - LC

Jack Stecher, Alberta School of Business

Campus WU D4.4.008 12:00 - 13:00

Organizer WU Vienna

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.

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June 11th, 2019, 12:00-13:00, D4.4.008

Jack Stecher, Al­berta School of Busi­ness

Title: "Co­her­ent Clas­si­fic­a­tion and Sig­nal­ing"

Ab­stract

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.



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