Using Fundamental Analysis to Assess Earnings Quality Evidence from the Center for Financial Research and Analysis.pdf

文档介绍：Using Fundamental Analysis to Assess Earnings Quality:
Evidence from the Center for Financial Research and Analysis
by
Patricia M. Fairfield
Associate Professor
etown University
The McDonough School of Business
Washington, DC 20057
[phone]
J. Scott Whisenant*
Assistant Professor
etown University
The McDonough School of Business
Washington, DC 20057
[phone]
August 2000
*corresponding author
etown University
The McDonough School of Business
37th & O Streets, NW
Washington, . 20057
email: ******@
______________________
* This study has benefitted from ments of Srinivasan Sankaraguruswamy, Teri Yohn, Richard Sweeney, Jim Bodurtha, Rob
Schilit, and Howard Schilit.
Using Fundamental Analysis to Assess Earnings Quality:
Evidence from the Center for Financial Research and Analysis
ABSTRACT: We document post-event negative abnormal returns to the (implicit) sell
mendations of a group of fundamental analysts. We also find statistically significant deterioration
in the financial performance of the identified firms in the year after the mendations. Together the
results are consistent with the claim of fundamental analysts that they are able to identify firms which are
essfully masking operational problems with aggressive accounting. The sample in this study
comprises 378 firms identified over a four-year period by the Center for Financial Research and Analysis
(CFRA). The CFRA offers to subscribers a monthly report identifying approximately ten firms which
CFRA claims are experiencing operational problems and particularly those that employ unusual or
aggressive accounting practices to mask the problems. The CFRA analysts rely on traditional techniques
of fundamental analysis, including mechanical screens and more time-consuming analyses of footnotes
and other public disclosures. Their data sources include only publicly available information, primarily
SEC filings. We conclude that the CFRA’s appare