Street Earnings And Board Independence

This paper examines the characteristics of Street Earnings and board independence to understand how board structure shapes disclosure.(1) have more predictive ability for future earnings, suggesting that the excluded expenses are less transitory, (2) are increasingly likely to occur in quarters when Street Earnings exceed analyst expectations but GAAP earnings do not, indicating that managers are more likely to use Street Earnings to meet the analyst forecast, (3) have a significantly stronger association with subsequent returns, indicating that the excluded expenses are less transparent as investors are slow to price their future earnings implications, and (4) are more strongly related to the intensity of insider trading activity. Overall, the result suggests that board independence is associated with the quality of voluntary earnings-related disclosure.

Provided by: New York University (Stern) Topic: Software Date Added: Jan 2006 Format: PDF

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