Acct665FinalExam - ACCT 665 Final Exam Fall 1996 I. Take...

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ACCT 665 Final Exam Fall 1996 I. Take home (50 points). Turn in with part II of the final exam (or before), maximum 2 pages. The market model is r it = α I + β i r mt + e it . How is “e” used by: (1) Leftwich (1981) to analyze business combination standard setting on loan agreements; (2) Choi and Jeter (1992) to evaluate qualified opinions; and (3) Kasznik and Lev (1995) to evaluate “earnings surprise” on “bad news” firms. What does this tell us about the development of market return/event models since Ball and Brown (1968)? II. Answer any 2 (25 points each). 1. Altman (1968) used a matched-pair design. Flagg et al. (1991) did not. Why? Contrast the experimental design of the two projects. 2. Ashton (1974) evaluated auditor judgment based on consensus and stability. Did Ashton adequately measure judgment using his survey techniques and psychology theory? Explain. 3. Dummy variables are used frequently in multivariate accounting research models. Lowballing, time dummies, bankrupt/non-bankrupt are typical examples. What is a dummy variable and how is it interpreted in an OLS regression model? Assume that you want to evaluate four levels of bond rating in an OLS model. How can dummies be used? 4. What is an efficient contract? What is the effect of accounting regulation on writing management compensation contracts efficiently?
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ACCT 665 Fall 1997 Final Exam I. Ball & Brown (1968) used the market model to measure “good news” and “bad news”? Leftwich (1981) used a 2-stage approach for his accounting choice study. Explain Leftwich’s method. How did it differ from B&B? More recently, earnings response coefficients (ERCs) have been used (e.g., Choi & Jeter, 1992). Explain how ERCs analysis compares to B&B. Is ERCs useful to explain earnings quality? Explain. (50 points) II. Answer any 2 (25 points each). 1. Healy (1985), Dechow et al. (1995), and others focus on accruals to measure earnings management. What is earnings management? How are accruals measured and used in these studies? 2. Assume you’re studying lowballing using audit economics. Explain the rationale of lowballing according to DeAngelo (1981). Explain how efficient contracting could be used as a theoretical structure when analyzing lowballing. 3. Altman (1968) and most empirical bankruptcy studies use a matched pair design, claiming to “predict” bankruptcy. In fact, this is a “classification” model. Why? What additional steps typically are used to validate “classification” accuracy.
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ACCT 665 Final Exam Fall 1998 I. Aspects of auditing research relate to capital market pricing and efficient contracting. Hogan (1997) analyzes the self selection of Big Eight auditors for the IPO market. Choi and Jeter (1992) use earnings response coefficients to analyze qualified audit opinions. Wilkins (1997) finds a relationship of debt covenant violation waivers to going concern opinions. Wells and Loudder (1997) find a market effect associated with auditor resignations. Flagg et al. (1991) find a
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Acct665FinalExam - ACCT 665 Final Exam Fall 1996 I. Take...

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