Selected Accepted Journal Articles
Clor Proell, S., Warfield, T., & Proell, C. (2013). The Effects of Presentation Salience and Measurement Sujectivity on Nonprofessional Investors' Fair Value Judgmentsr Value Information.
Contemporary Accounting Research
The purpose of this research is two-fold. First, we examine how nonprofessional investors interpret firms with differences in fair value inputs. Second, we examine how changes to the financial statements, similar to those proposed in the FASB’s financial statement presentation project, affect the interpretation of firms with different fair value inputs. We find that nonprofessional investors view firms with different fair value inputs as having differentially reliable financial statements. Further, we predict and find that when the financial statements contain a column that highlights the effect of changes in fair value on net income, this affects not only how nonprofessional investors interpret firms with different fair value inputs but also affects the P/E multiple that they assign to the firm. Additional analyses examine the intentionality of participants’ responses. Our results are relevant to both the debate about fair value accounting and to the FASB’s financial statement presentation project.
, doi: 10.1111/1911-3846.12041.
Selected Published Journal Articles
Warfield, T., & Luo, T. (2012). The implementation effects of expanded consolidation: the case of consolidating special purpose entities.
Accounting and Finance
This article examines the impact of FASB Interpretation No. 46 (Revised), FIN
46(R), on perceived earnings informativeness of companies with special
purpose entities (SPEs). We find that the impact depends on the pre-FIN 46
(R) incentives for using SPEs. The implementation of FIN 46(R) improves
perceived earnings informativeness of companies that previously used SPEs less
for the manipulation of financial reporting, but does not generate the same
improvement for those otherwise. Furthermore, these differential effects are
more pronounced when companies reacted to FIN 46(R) by restructuring their
SPEs to keep them off financial statements.
Key words: Expanded consolidation; Implementation effects; Special purpose
JEL classification: M41
, On-Line (28 pages). doi: 10.1111/acfi.12004.
Dickinson, V., Kimmel, P., & Warfield, T. (2012). The Accounting and Market Consequences of Accelerated Share Repurchases.
Review of Accounting Studies
We evaluate the representational faithfulness of the accounting treatment
of a recent and well-established type of structured transaction—accelerated
share repurchases (ASRs). ASRs are popular because accretive earnings per share
benefits are recognized immediately, while any gains or losses on the forward
contract used to execute an ASR bypass income, and are reported directly in equity.
We document lower value relevance for the liabilities of ASR companies compared
with a size- and industry-matched sample. ERC tests also indicate a market discount
for the earnings of ASR companies compared with the control sample. Finally, we
document significant abnormal returns to a trading strategy based on unrealized
gains or losses on ASR transactions. Our results indicate that the current accounting
for ASRs does not result in representative reporting of these transactions. As a
result, financial statement users might benefit from recognition of ASR elements in
(17), 41-71. doi: 10.1007/s11142-011-9162-7.
Cheng, Q., Warfield, T., & Ye, M. (2011). Equity incentives and earnings management: Evidence from the banking industry.
Journal of Accounting, Auditing and Finance
We examine the relationship between equity incentives and earnings management in the banking industry. By focusing on this regulated industry and using industry-specific earnings management proxies, we provide evidence on the impact of regulation on earnings management arising from CEOs' equity incentives. We find that bank managers with high equity incentives are more likely to manage earnings, but only when capital ratios are closer to the minimum regulatory capital requirements. This finding indicates that in the banking industry, potential regulatory intervention induces, rather than mitigates, earnings management arising from equity incentives.
(26), 317-349. doi: 10.1177/0148558X11401219.
Kohlbeck, M., & Warfield, T. (2010). Accounting Standard Attributes and Accounting Quality. Research in Accounting Regulation
(22), 59-70. doi: 10.1016/j.racreg.2010.07.001.
Cheng, Q., & Warfield, T. (2005). Equity incentives and earnings management. The Accounting Review
(80), 441-476. doi: 10.2308/accr.2005.80.2.441.
Skaife, H., & Warfield, T. (2003). Audits as a Corporate Governance Mechanism: Evidence from the German Market. Journal of International Accounting Research
(2), 1-21. doi: 10.2308/jiar.2003.2.1.1.
Cheng, Q., Frischmann, P., & Warfield, T. (2003). The market perception of corporate claims. Research in Accounting Regulation (16), 3-28.