Course Title: Frontier of Accounting and Finance Research
Instructor: Chi-Wen Jevons Lee
Course Description:
1. This course applies economics, finance theory, and quantitative methods to study the use of accounting information in stock market. We will treat accounting information like any other economic good and investigate its demand and supply. The course is composed of the following major topics:
1) Electronic Database for Financial Analysis
2) SPSS/SAS and Financial Analysis
3) Descriptive Statistics
4) Cross-sectional Analysis
5) Time-Series Analysis
6) Accounting and Efficient Market Hypothesis.
7) Techniques of Accounting Analysis.
8) Risk Analysis and Measurement.
9) Accounting and Managerial Behavior.
2. This course provides students necessary skills for a career in Commercial Banking, Investment Banking, Academic Scholars and Corporate Controller/CFO. Students should have basic analytical skills in economics, finance theory, and statistics.
3. Foster s Financial Statement Analysis, Beaver s Financial Reporting: An Accounting Revolution and Watts and Zimmerman s The Positive Accounting Theory are recommended but not required.
4. Evaluation: Written Final Examination.
Course Outline and Reading List
Topic 1. Accounting and Efficient Market Hypothesis
Chapter 1. Introduction
Foster, George, Financial Statement Analysis, NJ: Prentice‑Hall, Chapters 1 and 9.
Beaver, W.H., "Market Efficiency," Accounting Review, January 1981, pp.23‑37.
Chapter 2. Accounting Information and Asset Pricing in Stock Market
**Grossman, S. and J. Stiglitz, "Information and Competitive Price System", American Economic Review, May 1976, PP.246‑253.
*Lee, C.J., "Fundamental Analysis and Stock Market", Journal of Business Finance and Accounting, Spring 1987, pp. 131-141.
Lee, C.J., "Information Content of Financial Columns," Journal of Economics and Business, 1986.
Fama, E. and K. French, "The Cross-section of Stock Returns," Journal of Finance, 1992, pp. 427-466.
**Lee, C.J., "Financial Information Infrastructure and the Development of Capital Market" Journal of Accounting and Public Policy, 1989.
Topic 2. Techniques of Accounting Analysis
Chapter 3. Cross‑sectional Analysis
**Beaver, W.H., and D. Morse "What Determines Price‑Earning Ratio ? " Financial Analyst Journal, July 1978, pp.65‑76.
Foster, George, Financial Statement Analysis, NJ: Prentice‑Hall, 1986, Chapters 3,4,6 (including appendix).
**Lee, C. J., "Inventory Accounting and the E/P Ratios: A Puzzle," Contemporary Accounting Research, 1988.
** Lee, C.J., "Stochastic Properties of Cross-sectional Financial Data," Journal of Accounting Research, Spring 1985.
Chen, K.C. and C.J. Lee, "Measurement of Business Performance and Tobin s q Theory," Journal of Accounting, Auditing and Finance, 1995.
Chapter 4. Time‑series Analysis
*Foster, Financial Statement Analysis, ch. 7 and 8.
Foster, G., "Quarterly Accounting Data: Time Series Properties and Predictive‑Ability Results," Accounting Review, January 1977, pp.1‑21.
**Lee, C.J. and Chung Chen, "Structural Change and Forecasting of Accounting Earnings in the Utility Industry," Journal of Accounting and Economics, 1990.
Pindyck & Rubinfeld, Econometric Models and Economic Forecasts,
chapter 13 : Properties of Stochastic Time Series,
chapter 14 : Linear Time Series Model,
chapter 17 : Example of Time Series Applications.
Topic 3. Practical Applications of Accounting Analysis
Chapter 5. Electronic Expert System for Financial Decision
**Foster, Financial Statement Analysis, Chapters 14,15,16.
Ohlson, J.A., "Financial Ratios and Probabilistic Prediction of Bankruptcy," Journal of Accounting Research, Spring 1980, pp. 109‑131.
**Chen, Kevin and C.J. Lee, "Financial Ratios and Corporate Endurance: The Case of Oil and Gas Industry," Contemporary Accounting Research, 1993.
Chapter 6. Merger and Acquisition
* Foster, G., Financial Statement Analysis, ch. 13.
Jensen, M.J. and R.S. Ruback "The Market For Corporate Control: The Scientific Evidence." Journal of Financial Economics.1983. PP.5‑50.
**Ghosh, Aloke and C.J. Lee, "Accounting Information and Valuation of Takeover Premium," 1996.
Chapter 7. Accounting Information and Stock Valuation
Ball, R. and P. Brown,"An Empirical Evaluation of Accounting Income Numbers, " Journal of Accounting Research, Autumn 1968, pp.159‑78.
Beaver, W. H., Financial Reporting: An Accounting Revolution, Prentice Hall, 1981.
Foster G. Financial Statement Analysis, Prentice Hall, 1978, Chapter 11.
**Joh, G. and C.J. Lee, "Market Responses to Accounting Information in Oligopoly," Journal of Business, 1992.
Lee, C.J., "The Tax Effect Hypothesis and Inventory Accounting," Journal of Business Finance and Accounting, 1989.
Topic 4. Accounting and Managerial Behavior
Chapter 8. Accounting Choices
Foster, G. Financial Statement Analysis, ch. 2 and 5.
Holthausen, R.W. and R.W. Leftwich, "The Economic Consequences of Accounting Choice: Implications of Costly Contracting and Monitoring," Journal of Accounting and Economics, August 1983, PP. 77‑118.
**Lee, C.J. and D. Hsieh, "Choice of Inventory Accounting Methods: A Test of Alternative Hypotheses," Journal of Accounting Research Autumn, 1985.
**Lee, C.J. and C.R. Petruzzi,"Inventory Accounting Choice and Uncertainty", Journal of Accounting Research 1989.
Lee, C.J., "The Tax Effect Hypothesis and Inventory Accounting," Journal of Business Finance and Accounting, 1989.
Chapter 9. Opportunistic Accounting Decision
Joh, G. and C.J. Lee, "Timing of Financial Disclosure," 1994.
**Chen, Kevin and C.J. Lee, "Executive Bonus Plans and Accounting Trade-offs: The Case of the Oil and Gas Industry, 1985-86." Accounting Review, January 1995.
