Some Evidence on Investor Actions and Accounting Messages-Part II.

Abstract The article focuses on evidence regarding the influence of annual reports on the market actions of common stockholders. The impact of data presented in annual accounting reports on changes in investors' price expectations has been evaluated. In Part I, which appeared in the April 1971 issue of the journal The Accounting Review, the motivation for the estimation models used and some details of these models have been considered. In this part, sample selection, estimation results, and related issues have been dealt with. The impact of data presented in annual accounting reports on changes in investors' price expectations has been evaluated. The regression models introduced in Part I were applied to data from a random sample of eighty firms. The sample firms were selected from the set of all December fiscal-year firms for which the data available for the period 1947-1966 has been given. The data includes net income, common equity, current assets, long term debt, current liabilities and others. The above items were used to form ratios that were used as regressors in the tests for the impact of accounting data on changes in investors' price-expectations.