Appendix 4.(Text subsection: Financial statement analysis - a rediscovered tool)
Author(s): Lev (1989)
Sample Number - Source (dates): Review article - several
Method(s): Comparative analysis
Index: Several
Findings: Earnings response coefficients (ERCs), as well as the explanatory power of the models, are low.
Author(s): Ou & Penman (1989)
Sample Number - Source (dates): 19,579 firms - Compustat/CRSP firms (1970-84)
Method(s): Statistical search for fundamentals
Index: Financial statement ratios selected mechanically
Findings: Excess returns are possible via the use of extended financial statement analysis.
Author(s): Martikainen (1990)
Sample Number - Source (dates): 28 HSE listed firms - annual reports (1975-86)
Method(s): Factor analysis
Index: Financial statement ratios
Findings: Financial leverage, operating leverage, corporate growth, and profitability are found to be long-term determinants of stock returns in the Finnish stock market. However, the incremental significance of those characteristics is found to be low.
Author(s): Lev & Thiagarajan (1993)
Sample Number - Source (dates): 140-180 firms per year - Compustat firms (1970-88)
Method(s): Guided search for fundamentals
Index: Financial statement ratios selected by analysts
Findings: Excess returns are possible via the use of extended financial statement analysis.
Author(s): Schadewitz (1996b)
Sample Number - Source (dates): 64 HSE-listed firms - interim reports (1985-93)
Method(s): Actual disclosure vs. forecasted disclosure, regressions
Index: 26 items, based on literature, recent interim reports, and in-depth interviews
Findings: The principal finding is that disclosure enhances the communication of earnings information to the market. This is particularly evidenced when the level of disclosure is as expected.
See the subsection of the text entitled: Financial statement analysis - a rediscovered tool for a discussion of this research area.
From Disclosure Indices to Business Communication: A Review of the Transformation by Schadewitz and Blevins
