Graduation Year

2016

Date of Submission

4-2016

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Eric Hughson

Terms of Use & License Information

Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© 2016 Andrew B. Sova

Abstract

With increasing scrutiny over standards of financial statement transparency, this paper attempts to resolve misconceptions about effects of negative special items on future earnings. Value investor Benjamin Graham advises students to avoid firms that consistently post special items, because it is indicative of the volatility of the business. Using panel data from 2003 to 2014 and a regression structure used by Burghstaler et al. (2002), I find in contrast to Graham’s warning, that negative special items significantly increase earnings in the four quarters following its occurrence. Furthermore, I analyze results by sector and find that negative special items in the Information Technology sector have the most dramatic positive effects on future earnings. This study gives investors more insight as to what negative special items mean for future earnings of a company.

This thesis is restricted to the Claremont Colleges current faculty, students, and staff. It is not available for interlibrary loan. Please send a request for access through Contact Us.

Share

COinS