The Journal of Business Forecasting Methods & Systems, 1994
Generally accepted auditing standards require that auditors use analytical procedures (APs) at ce... more Generally accepted auditing standards require that auditors use analytical procedures (APs) at certain phases of an audit. The analytical procedure decision process involves comparing financial statement amounts to corresponding expectations of these amounts. A variety of forecasting methods exist for developing these expectations (predictions), ranging from data scanning to complex statistical models, such as regression analysis and time-series models. The current study examines the comparative predictive accuracy of three time-series models (the ARIMA model, the Census X-11 model, and the Holt-Winters model) and a proxy for data scanning (a random walk model) in relation to the AP decision process. The results indicate that data scanning has performed relatively well since the random walk model was not significantly outperformed in many cases. In addition, the Holt-Winters model might be considered a viable forecasting alternative to the ARIMA model in an AP decision context since...
The purpose of this paper is to explore the possibility that investors and financial analysts cou... more The purpose of this paper is to explore the possibility that investors and financial analysts could effectively use consolidated-based forecasts of conglomerate earnings even though they are generally less accurate than segmented-based forecasts. To accomplish this we discuss the concept of conditional efficiency and test for it on a set of ARIMA forecasts. The results indicate that forecasts based on segmented sales and margins not only dominate parallel forecasts based on consolidated sales and margins, but they are also conditionally efficient. This implies that composite forecasts would not provide benefits beyond those of the segmented forecasts. On the Incremental Benefits of Using Consolidated Accounting Data to Predict Conglomerate Earnings
This study investigates the effects of alternative factor weightings on unitary apportionment. Th... more This study investigates the effects of alternative factor weightings on unitary apportionment. The results indicate that the payroll factor tends to distort income allocations. Allocative fairness could be enhanced by eliminating the payroll factor and using a sales-property formula instead.
Earnings predictability can affect investment decisions and stock prices. A n important source of... more Earnings predictability can affect investment decisions and stock prices. A n important source of earnings forecasts for a wide variety of empirical studies has been the Value Line Investment Survey. The purpose of this study is to identify factors that consistently account for cross-sectional differences in Value Line earnings predictability. A multivariate model consisting of four company variables and a set of industry indicator variables is used to evaluate the intertemporal consistency of factors related to earnings predictability. Quarterly and annual forecasts are used to measure earnings forecast accuracy. The results by year indicate that one factor, earnings variability, is consistently related to earnings predictability.
Abstract This study explores the proposition that differences between consolidated (CN) and segme... more Abstract This study explores the proposition that differences between consolidated (CN) and segmented (SG) income forecasts may depend in part on company size. Simulated mergers of existent autonomous firms provide quarterly time series data and ARIMA models are used to project both quarterly and annual earnings. Small-segment firms tended to yield SG superior predictions for quarterly forecasts, but no such differences were observed for annual forecasts. Large-segment firms tended to yield no CN-SG differences for either quarterly or annual forecasts.
Intelligent Systems in Accounting, Finance and Management, 1995
AMTexpert is a prototype of an expert decision support system EDSS for the corporate alternative ... more AMTexpert is a prototype of an expert decision support system EDSS for the corporate alternative minimum tax AMD. The corporate AMT was introduced as part of the Tax Reform Act of 1986 in order to force US corporations to pay more tax. The complicated and interrelated nature of the AMT system has made compliance and planning even more difficult for corporate taxpayers. Given the complexities of the corporate AMT, significant benefits may accrue from the development of an EDSS. In effect, an EDSS combines the judgmental benefits of an expert system ES with the computational benefits of a decision support system DSS. AMTexpert is menu driven with six interdependent phases. The heart of the system is a 'scoreboard' used to compare and evaluate alternative tax positions. Context-sensitive advice and explanations are provided to guide the user. The system was validated and evaluated by two groups of outside experts. AMTexpert demonstrates that an EDSS may be developed from existing tax and systems software.
type="main" xml:id="acfi12038-abs-0001"> Prior research shows that the tim... more type="main" xml:id="acfi12038-abs-0001"> Prior research shows that the time-series variability of corporate earnings affects forecasting accuracy and corporate risk, yet little is known about the determinants of earnings variability. This study analyses interfirm differences in earnings variability. Large-sample evidence shows how the ratio of accrual variability to cash-flow variability varies across a cross-section of firms and how these components and the correlation between contemporaneous cash flows and accruals are related to key economic fundamentals.
This study suggests that simulated mergers can be used to help evaluate the effects of diversific... more This study suggests that simulated mergers can be used to help evaluate the effects of diversification on corporate performance. The results, which are consistent with a risk-reduction motive for congoraerate diversification, imply that conglomerate strategies focused on fewer and larger units may be advantageous in terms of certain measures of risk and return. Forecast error is used here to measure strategic risk and return on equity is used to measure return.
Management Accounting Research aims to serve as a vehicle for publishing original scholarly work ... more Management Accounting Research aims to serve as a vehicle for publishing original scholarly work in the field of management accounting. The Journal welcomes original research papers using archival, case, experimental, field, survey or any other relevant empirical method, as well as analytical modelling, framework or thought pieces, substantive review articles, and shorter papers such as comments or research notes subject to peer review. The Journal provides an international forum for the dissemination of original scholarly contributions drawing on any relevant source discipline suitable to examine and elicit novel implications for management accounting practices or systems in use in any type of organization globally. Benefits to authors We also provide many author benefits, such as free PDFs, a liberal copyright policy, special discounts on Elsevier publications and much more. Please click here for more information on our author services.
The earnings of some companies are easier to analyze and predict than others. Because earnings pr... more The earnings of some companies are easier to analyze and predict than others. Because earnings predictability affects stock prices, investors and researchers have relied on a variety of indexes, such as the Value Line Earnings Predictability Index (VLPI), to gauge ex ante differences in predictability. This study empirically analyzes the performance of VLPI versus several other indexes. Rank correlations with subsequent earnings forecast errors are used to measure index performance. Interestingly, the results indicate that VLPI performs as well as a corresponding index based on past forecasting accuracy.
The Journal of Business Forecasting Methods & Systems, 1994
Generally accepted auditing standards require that auditors use analytical procedures (APs) at ce... more Generally accepted auditing standards require that auditors use analytical procedures (APs) at certain phases of an audit. The analytical procedure decision process involves comparing financial statement amounts to corresponding expectations of these amounts. A variety of forecasting methods exist for developing these expectations (predictions), ranging from data scanning to complex statistical models, such as regression analysis and time-series models. The current study examines the comparative predictive accuracy of three time-series models (the ARIMA model, the Census X-11 model, and the Holt-Winters model) and a proxy for data scanning (a random walk model) in relation to the AP decision process. The results indicate that data scanning has performed relatively well since the random walk model was not significantly outperformed in many cases. In addition, the Holt-Winters model might be considered a viable forecasting alternative to the ARIMA model in an AP decision context since...
The purpose of this paper is to explore the possibility that investors and financial analysts cou... more The purpose of this paper is to explore the possibility that investors and financial analysts could effectively use consolidated-based forecasts of conglomerate earnings even though they are generally less accurate than segmented-based forecasts. To accomplish this we discuss the concept of conditional efficiency and test for it on a set of ARIMA forecasts. The results indicate that forecasts based on segmented sales and margins not only dominate parallel forecasts based on consolidated sales and margins, but they are also conditionally efficient. This implies that composite forecasts would not provide benefits beyond those of the segmented forecasts. On the Incremental Benefits of Using Consolidated Accounting Data to Predict Conglomerate Earnings
This study investigates the effects of alternative factor weightings on unitary apportionment. Th... more This study investigates the effects of alternative factor weightings on unitary apportionment. The results indicate that the payroll factor tends to distort income allocations. Allocative fairness could be enhanced by eliminating the payroll factor and using a sales-property formula instead.
Earnings predictability can affect investment decisions and stock prices. A n important source of... more Earnings predictability can affect investment decisions and stock prices. A n important source of earnings forecasts for a wide variety of empirical studies has been the Value Line Investment Survey. The purpose of this study is to identify factors that consistently account for cross-sectional differences in Value Line earnings predictability. A multivariate model consisting of four company variables and a set of industry indicator variables is used to evaluate the intertemporal consistency of factors related to earnings predictability. Quarterly and annual forecasts are used to measure earnings forecast accuracy. The results by year indicate that one factor, earnings variability, is consistently related to earnings predictability.
Abstract This study explores the proposition that differences between consolidated (CN) and segme... more Abstract This study explores the proposition that differences between consolidated (CN) and segmented (SG) income forecasts may depend in part on company size. Simulated mergers of existent autonomous firms provide quarterly time series data and ARIMA models are used to project both quarterly and annual earnings. Small-segment firms tended to yield SG superior predictions for quarterly forecasts, but no such differences were observed for annual forecasts. Large-segment firms tended to yield no CN-SG differences for either quarterly or annual forecasts.
Intelligent Systems in Accounting, Finance and Management, 1995
AMTexpert is a prototype of an expert decision support system EDSS for the corporate alternative ... more AMTexpert is a prototype of an expert decision support system EDSS for the corporate alternative minimum tax AMD. The corporate AMT was introduced as part of the Tax Reform Act of 1986 in order to force US corporations to pay more tax. The complicated and interrelated nature of the AMT system has made compliance and planning even more difficult for corporate taxpayers. Given the complexities of the corporate AMT, significant benefits may accrue from the development of an EDSS. In effect, an EDSS combines the judgmental benefits of an expert system ES with the computational benefits of a decision support system DSS. AMTexpert is menu driven with six interdependent phases. The heart of the system is a 'scoreboard' used to compare and evaluate alternative tax positions. Context-sensitive advice and explanations are provided to guide the user. The system was validated and evaluated by two groups of outside experts. AMTexpert demonstrates that an EDSS may be developed from existing tax and systems software.
type="main" xml:id="acfi12038-abs-0001"> Prior research shows that the tim... more type="main" xml:id="acfi12038-abs-0001"> Prior research shows that the time-series variability of corporate earnings affects forecasting accuracy and corporate risk, yet little is known about the determinants of earnings variability. This study analyses interfirm differences in earnings variability. Large-sample evidence shows how the ratio of accrual variability to cash-flow variability varies across a cross-section of firms and how these components and the correlation between contemporaneous cash flows and accruals are related to key economic fundamentals.
This study suggests that simulated mergers can be used to help evaluate the effects of diversific... more This study suggests that simulated mergers can be used to help evaluate the effects of diversification on corporate performance. The results, which are consistent with a risk-reduction motive for congoraerate diversification, imply that conglomerate strategies focused on fewer and larger units may be advantageous in terms of certain measures of risk and return. Forecast error is used here to measure strategic risk and return on equity is used to measure return.
Management Accounting Research aims to serve as a vehicle for publishing original scholarly work ... more Management Accounting Research aims to serve as a vehicle for publishing original scholarly work in the field of management accounting. The Journal welcomes original research papers using archival, case, experimental, field, survey or any other relevant empirical method, as well as analytical modelling, framework or thought pieces, substantive review articles, and shorter papers such as comments or research notes subject to peer review. The Journal provides an international forum for the dissemination of original scholarly contributions drawing on any relevant source discipline suitable to examine and elicit novel implications for management accounting practices or systems in use in any type of organization globally. Benefits to authors We also provide many author benefits, such as free PDFs, a liberal copyright policy, special discounts on Elsevier publications and much more. Please click here for more information on our author services.
The earnings of some companies are easier to analyze and predict than others. Because earnings pr... more The earnings of some companies are easier to analyze and predict than others. Because earnings predictability affects stock prices, investors and researchers have relied on a variety of indexes, such as the Value Line Earnings Predictability Index (VLPI), to gauge ex ante differences in predictability. This study empirically analyzes the performance of VLPI versus several other indexes. Rank correlations with subsequent earnings forecast errors are used to measure index performance. Interestingly, the results indicate that VLPI performs as well as a corresponding index based on past forecasting accuracy.
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Papers by Peter Silhan