Titre
The Relevance of Accounting Information in a Stock Market Bubble: Evidence from Internet IPOs
Type
article
Institution
Externe
Périodique
Auteur(s)
Bhattacharya, N.
Auteure/Auteur
Demers, E.
Auteure/Auteur
Joos, P.
Auteure/Auteur
Liens vers les personnes
ISSN
0306-686X
Statut éditorial
Publié
Date de publication
2009-06-04
Volume
37
Numéro
3-4
Première page
291
Dernière page/numéro d’article
321
Peer-reviewed
Oui
Langue
anglais
Résumé
Prior research shows that accounting information is relevant for stock valuation, failureprediction, performance evaluation, optimal contracting, and other decision-making contexts inrelatively stable market settings. By contrast, accounting’s role during stock market bubbles suchas those involving a revolutionary emerging technology is the subject of considerable debate,and prominent market observers have alleged that outdated and flawed accounting practicescontributed to the crash of the Internet-led high-tech bubble of the late 1990s. We addressthe issue of whether accounting data is informative in a stock market bubble by examiningits failure prediction ability in the context of Internet IPOs, one of the most egregious andeconomically significant sectors of the high tech bubble. Our setting of young start-up firms isone in which there is relatively little room for managerial discretion with respect to accountingaccruals; Internet firms’ accounting earnings closely approximate operating cash flows. Yet incontrast to widespread criticisms of accounting and its alleged role in fueling the bubble, wefind that accounting variables are highly informative for failure prediction; specifically, they aresignificant in explaining ex post realized Internet IPO failures. Using an existing IPO failureprediction methodology and two alternative definitions of innovative IPOs, we further showthat ex ante, out-of-sample Internet IPO failure forecasts are associated with economically andstatistically significant hedge returns. Our analyses suggest that the traditional financial reportingsystem could serve as an anchor during speculative bubbles.
PID Serval
serval:BIB_08BB73681C68
Open Access
Oui
Date de création
2018-07-24T08:00:58.634Z
Date de création dans IRIS
2025-05-20T16:44:39Z