金融Essay怎么写：The Strengths and Weaknesses of the 1968 'Ball and Brown' Study

本文是金融专业的留学生Essay范例，题目是“The Strengths and Weaknesses of the 1968 'Ball and Brown' Study（1968年“鲍尔和布朗”研究的优缺点）”，随着跨国公司的兴起和跨国投资的快速增长，对会计收益数字的实证评价的需求越来越大。这是一个广泛的研究领域，起源于鲍尔和布朗研究的开创性出版物(1968年)。文献增长迅速，在过去的三十年里，在领先的会计和金融学术期刊上发表了超过1000篇论文(Kothari,2001)。然而，一些会计专家认为，Ball和Brown的研究存在一些不足之处。与此同时，批评人士认为，他们的实证评价促成了积极会计理论，这一理论在20世纪70年代末彻底改变了会计文献。本文的目的是介绍鲍尔和布朗的论文的优势，并确定其对会计发展的影响。本文认为，这篇论文的局限性并不严重，但它的优势是非常显著的。首先，讨论了支持和反对实证研究的论点。最后，给出了结论。

With the rise of multinational companies and the rapid growth of transnational investments, there has been an increasing demand for an empirical evaluation of accounting income numbers. This is a broad area of research that originated with the seminal publication of the Ball and Brown study(1968).The literature has grown rapidly, with over 1,000 published papers in leading academic accounting and finance journals in the past three decades (Kothari,2001).However, several accounting experts assert that there are some weaknesses in the research of Ball and Brown. Meanwhile, critics argue that their empirical evaluation contributed to the positive accounting theory that revolutionized accounting literature in the late 1970s. The purpose of this essay is to introduce the strengths of Ball and Brown’s paper and identify its influence on the development of accounting. This essay will argue that the limitation of the paper is not serious, but its advantages are very significant. First, arguments for and against the empirical research are discussed. Then, an evaluation is explored .Lastly, a conclusion is presented.

The weaknesses of the paper

Providing empirical evidence to ascertain whether accounting numbers contain or convey information about a firm’s financial performance was the major motivation that led to the research of Ball and Brown (1968). They pioneered capital markets research in accounting. However, their study still has some weaknesses.

Unreliability不可靠

As a potential limitation of their studies, the reliability of their results depends on the sources of information. Although we are not disputing the reliability of the said sources, they should be investigated. Research should be conducted to document various types of institutions. According to Zhang (2007), the selection of the sample did not include companies meet the following four conditions. The first one is the failed company. The second one is a company whose financial year does not end on the 31st of December. The third one is the company that is not recorded in the CRSP database of stock price research centers. It also includes the young firm that is not described by the Wall Street Journal. Given those situations, the generality and reliability of their results may be reduced.

作为他们研究的一个潜在限制，他们的结果的可靠性取决于信息来源。虽然我们不怀疑上述消息来源的可靠性，但应该对它们进行调查。应该进行研究，记录各种类型的机构。根据Zhang(2007)，样本的选择不包括满足以下四个条件的公司。第一个是失败的公司。第二个是一个公司的财政年度没有在12月31日结束。第三种是股价研究中心的CRSP数据库中没有记录的公司。它还包括《华尔街日报》没有描述的这家年轻公司。在这些情况下，其结果的普遍性和可靠性可能会降低。

Limitations

This research firmly establishes that earnings reflect some of the information in security prices. However, this early research did not perform statistical tests comparing alternative performance measures, considering that the primary concern was to ascertain whether there is any overlap between the earnings information and the information reflected in security prices.

In the 1980s, several studies statistically compared stock returns with earnings, accruals, and cash flows (Rayburn, 1986). Aside from providing a formal test, the previous research used a relatively crude measure of cash flow. The succeeding studies used more sophisticated expectation models to isolate accurately the unexpected components of earnings, accruals, and cash flows, given that returns in an efficient market only reflect the unanticipated components (Livnat et al., 1990).ListenRead phonetically

在20世纪80年代，有几项研究对股票回报率与收益、应计收益和现金流进行了统计比较(Rayburn, 1986)。除了提供一个正式的测试外，先前的研究使用了一种相对粗糙的现金流测量方法。后续的研究使用更复杂的预期模型来准确地分离收益、应计利润和现金流的意外成分，因为在有效市场中，收益只反映意外成分(Livnat et al.， 1990)。ListenRead语音学上

The strengths of the paper

Although the weakness of this paper is obvious, the design of variables and the results of the test have made outstanding contributions to research of accounting income.

Ingenious design of variables巧妙的变量设计

After identifying the research themes, Ball and Brown selected the most representative accounting income numbers to measure the information content. Considering that shareholders are more concerned about EPS and net income, Ball and Brown used them as variables. To determine the information content of the accounting income, they used market efficiency hypothesis and the capital asset pricing model as references.

在确定了研究主题后，Ball和Brown选择了最具代表性的会计收入数字来衡量信息内容。考虑到股东更关心每股收益和净收入，Ball和Brown将其作为变量。为了确定会计收入的信息内容，他们借鉴了市场效率假设和资本资产定价模型。

According to the efficient market hypothesis, the authors maintained that observable stock price is fluctuant and linked with information. This can mean that accounting income numbers are useful. The key to determining the relationship between accounting income and stock price is to distinguish the security prices of a particular company as well as all the other companies. Therefore, the authors built two models of market expected return to examine how the market reacts to accounting income numbers.

Ball and Brown separated factors that affect earning into two different kinds: specific factors and system factors. System factors affect all companies, thus, the surplus of one company and other companies can be linked with each other. If the link is suitable, then stability can be shown using a fixed function, enabling us to achieve the income conditional expectation of one company based on other companies’ data. Thus, changes in the unexpected surplus of earning can be estimated by calculating by the changes in both actual income and conditional expectation. The authors defined the difference as the gain of current information. At the same time, they assumed that the changes in policy and corporate have been enacted before the first estimation. Thus, the influence of macroeconomic and policy changes can be estimated jointly.

The authors initially used the Ordinary Least Squares (OLS) to estimate the linear regression coefficient and intercept of samples’ annual income changes and average income changes. Secondly, the changes in the market income average were used as independent variables and included in the regression model to calculate the expected value of income changes. Finally, the changes in the value of unexpected earnings (prediction residual) referred to the actual value of the earnings change minus the change in earnings expectations. Therefore, market effect was removed from the estimation of expected surplus, which means the authors did not take system factors into account.

作者首先使用普通最小二乘(OLS)估计样本年收入变化和平均收入变化的线性回归系数和截距。其次，将市场收入平均值的变化作为自变量，纳入回归模型，计算收入变化的期望值。最后，预期收益价值的变化(预测剩余)是指收益变化的实际价值减去收益预期的变化。因此，在预期盈余的估计中剔除了市场效应，即没有考虑制度因素。

Similarly, the factors affecting the impact of no stock or stock returns can still be separated into two factors: system factors and specific factors. First, the authors used capital asset pricing model to separate the system factors and from non-system factors, then calculated the deviation of actual rate return and expected stock return. Secondly, Ball and Brown calculated the company’s stock return residuals (abnormal returns). Given that markets are efficient, stock prices will adjust quickly and effectively about the new information, so residuals can show the impact on stock prices of new information. To test the validity of statistics, Ball and Brown used an alternative model- naive model. In this model, an alternative variable is the expected surplus for last year’s actual surplus. The naive model does not eliminate the market effects, but verifies the earnings per share targets.

Remarkable results成果显著

This paper distinguished expected changes and unexpected changes in accounting incomes to estimate the abnormal return and changes in unexpected accounting incomes. In addition, it theorized that when the surplus prediction error is negative, it is both advantageous and disadvantageous. This paper presented the hypothesis that if the accounting income numbers could be linked with stock prices, then the announcement of accounting income numbers could result in changes in the stock returns. In the empirical test, the authors defined the month of annual report as 0, API representing the abnormal performance index of month M. In the process of calculating the API, the changes in unexpected earning are first separated into two groups (positive and negative), and then all samples are calculated together. Ball and Brown thought that if accounting income is related to stock returns, it can be assumed that if the changes in unexpected surplus are positive, then API is larger than 1 ; if they are negative, then the API is less than 1. In the combined sample, API is close to 1.

本文区分了会计收入的预期变动和意外变动，以估计会计收入的异常收益和意外变动。此外，还提出了当盈余预测误差为负时，既有利又不利的理论。本文提出假设:如果会计收益数字与股票价格挂钩，则会计收益数字的公布会导致股票收益的变化。在实证测试,作者定义了月的年度报告为0,API代表月m .异常性能指标的计算过程中API,意想不到的收入的变化首先分为两组(积极的和消极的),然后计算所有样本都在一起。Ball和Brown认为，如果会计收入与股票收益相关，则可以假设，如果意外盈余的变化为正，则API大于1;如果它们是负的，那么API小于1。在合并后的示例中，API接近于1。

Ball and Brown thought that annual income report can provide new information; however, it cannot be transmitted in time, because most of its content comes from various sources (interim report and non-accounting information, annual accounting report is only one of them) .The authors also found that after the announcement of the annual report, API has a tendency to drift on, that is, revenue projections’ residual error signal and the relationship between stock returns in the annual report may be continued for two months. After analysis, which may be caused by the transaction costs, and excluding the impact of transaction costs, the market reaction to the numbers tends to be unbiased.

Evaluation评价

At first glance, one weakness of this empirical research is the limitation of the sample which may decrease the generality and reliability of the results. However, the selection of the sample was similar to the tests used in related literature, which could lead to consistent results if used the same way on other samples.

乍一看，本实证研究的一个弱点是样本的局限性，这可能会降低结果的普遍性和可靠性。但是，样本的选择与相关文献中使用的测试相似，如果对其他样本使用同样的方法，可能会导致一致的结果。

The weaknesses of the paper also include the limitation of the statistical tests. Nonetheless, it had a significant impact on later research. Ball and Brown (1968) provide compelling evidence that there is information content in accounting earnings announcements. In the meantime, they correlate the sign of the abnormal stock return in the month of an earnings announcement with the sign of the earnings change of a certain firm’s earnings in a previous year earnings. Starting with Ball and Brown (1968), many studies used such association with stock returns to compare alternative accounting performance measures, such as historical cost earnings, current cost earnings, residual earnings, operating cash flows, and so on. Circumstances similar to those that facilitated the Ball and Brown (1968) study also contributed to Watts and Zimmerman’s positive accounting theory that revolutionized the accounting literature in the late 1970s (Watts and Zimmerman, 1979). As Watts and Zimmerman (1986) point out, most accounting research since Ball and Brown (1968) has been positive, and the role of accounting theory is no longer normative.

Ball and Brown (1968) heralded the positive-economics-based empirical capital markets research in the late 1960s.Concurrent developments in economics and finance constituted the theoretical and methodological impetus

to the early capital markets research in accounting. This historical detour exploring the forces that shaped the early capital markets research has positive pedagogical externalities, particularly for guiding new researchers. Seasoned researchers can skip over portions of this section without losing continuity.

对早期资本市场会计的研究。这种探索形成早期资本市场研究的力量的历史迂回具有积极的教学外部性，尤其是对指导新研究人员。经验丰富的研究人员可以跳过这一部分而不失去连续性。

In addition, this paper analyzes the insufficiency of theoretical studies using empirical testing to find out whether the accounting income numbers are useful. It initially provides reliable evidence that stock markets can influence annual reports. Then researchers began to do a lot in reflect of stock market. Furthermore, the method used is also applicable to a large number of accounting and financial issues, including dividend announcements, earnings announcements, mergers and acquisitions, and investment spending.

Conclusion结论

This essay has discussed the weaknesses and strengths of the empirical evaluation of accounting income numbers by Ball and Brown (1968). Although this research has some limitations, the merits far outweigh the disadvantages. It preceded the positive-economics-based empirical capital markets research of the late 1960s. Concurrent developments in economics and finance constituted the theoretical and methodological impetus to the early capital markets research in accounting. Therefore, it is suggested that this research plays a great role in the development of accounting .In this essay, only a few strengths are mentioned; the ways of putting these benefits into practice need further exploration.

本文讨论了Ball和Brown(1968)对会计收入数字的实证评价的优缺点。虽然本研究有一定的局限性，但利远大于弊。它先于上世纪60年代末基于实证经济学的实证资本市场研究。经济学和金融学的同步发展为会计早期资本市场研究提供了理论和方法上的推动力。因此，这一研究对会计的发展起到了很大的作用。如何将这些好处付诸实践还需要进一步探索。

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