John Carlson
PhD StudentProfessional Summary
CPA, CMA, and MBA with thirty years of accounting and fundraising experience
Contact Information
Phone:
513-556-7065
Fax:
513-556-6278
Teaching Interest
- Financial reporting, managerial accounting, and accounting for acquisitions/divestitures
Research Interest
- Financial reporting, managerial accounting and accounting for acquisitions/divestitures
Organization:
Wilmington College
Title:
Adjunct
End Date:
2009-12-31
Organization:
Miami University, Oxford, OH
Title:
Adjunct
End Date:
2004-06-30
Organization:
Association for the Advancement of Arts Education
Title:
Development Director
End Date:
2003-12-31
Organization:
Cincinnati Symphony Orchestra
Title:
Corporate Development Manager
End Date:
2000-05-31
Organization:
PowerWay Inc.
Title:
CFO
End Date:
1995-12-31
Organization:
Hurco Companies, Inc.
Title:
Divisional controller & corporate tax manager
End Date:
1993-12-31
Organization:
New Jersey Corp.
Title:
President
End Date:
1989-12-31
Organization:
Time Marketing Corp.
Title:
Controller
End Date:
1989-12-31
Organization:
University of Indianapolis
Title:
Adjunct
End Date:
1988-12-31
Organization:
Finn & Co. CPAs
Title:
staff accountant
End Date:
1983-12-31
Organization:
University of Cincinnati
Location:
Cincinnati, OH
Completed:
1999
Degree:
MBA
Organization:
Ball State University
Location:
Muncie, IN
Major:
Accounting Major
Completed:
1979
Degree:
BS
Research in progress
Title:
Can Quarterly Earnings Patterns Reveal Earnings Management?
Description:
Can the market be fooled by earnings management? Existing research suggests management believes it can and will manage their earnings and will do so in the 4th quarter.
For a sample of calendar year-end firms and using a modified model of combining Easton and Harris (1991), Hirshleifer, Hou, Teoh and Zhang (2004), and Das, Shroff and Zhang (2009) methodologies, I purpose to empirically test whether the market can distinguish quarterly earnings management when sorted by the Das et al. (2009) quarterly seasonal differencing design by comparing the association between monthly market returns with aggregated EPS (“levels”) and changes in aggregated EPS (“changes”) for the firm’s traditional year-end along with its three alternative year-ends that fall within its traditional fiscal year.
My initial research, replicating Easton and Harris (1991) for four different year-ends per firm, I assumed the traditional year-end represents the “managed earnings” year and the three alternative year-ends proxy for “unmanaged earnings” years, but my initial results were inconclusive. For all four year-ends the coefficients on the earnings level variable and changes in earnings level variable were positive and statistically significant at the 0.01 level.
Amending my Easton and Harris replication with the Das et al. 2009 methodology, it appears the market may be able to identify potential managed earnings firms and reward or punish as required.
I propose to analyze how the market responds to the first time a firm has a fourth quarter reversal by comparing the pre-and post event earnings levels and changes coefficients and then focus on how the market responds to firms that repeat or reverse this fourth quarter reversal.
Status:
On-Going
Research Type:
Scholarly
Title:
Given performance incentives for executive management, can we predict why management of a combined firm will spin-off an underperforming (over-performing) segment rather than sell it?
Description:
Combined firms have the potential for increased information asymmetry as investor struggle to decipher the segment information from the combined disclosure report. In spite of SFAS No. 131’s “management approach” that requires the firm to identify and report its operating segments based upon the way management “sees” the firm in making its operating decisions and assessing performance for both interim and annual reporting, information can be hidden in aggregated totals making it difficult to determine how the segment affects the firm’s profitability, its contribution to the firm’s overall risk, or how well management is running the overall business according to Chen and Zhang (2003 and 2007). Firms know their types but the market does not; therefore the market value for both types is the average at time t0 where similar to the Akerloff (1970) and Ross (1977) models.
We assume firms know their type and that good firms have the incentive to signal their type to separate themselves from the pool. In this model, management of good firms believe their firm’s market value may improve through voluntary divestiture as the market “unlocks” the intrinsic value of the firm (Shelifer and Vishny 2003) and has the decision whether to sell or spin the segment or to stay the course and do nothing. We assume a semi-strong market efficiency (Fama 1970 and 1991) where “security prices fully reflect all available information,” therefore with the announcement of a proposed divestiture, the value of the firm should increase as documented by Ofek and John (1995) for asset sales and Cusatis et al. (1993) for spin-offs.
Our model focuses on three topics: the divestiture choice, net assets of the firm after the transaction, and management efficiency defined in terms of ROA.
The difference between the two choices (to sell versus to spin) is in the size of the firm after the transaction (size of net assets due to selling the segment is greater than spinning the segment). Prior research (Jensen and Meckling (1976), Amihud & Lev (1981), Jensen and Ruback (1983), and Jensen (1986)) argued that on average management prefers to grow the firm beyond its optimal size in order to advance their personal goals such “entrenching themselves” as a way to protect themselves from takeovers and as a way to diversify their employment risk. Existing empirical research has also shown that smaller and “more focused” firms are subject to a higher probability of being taken over in the near term (Cusatis et al. 1993), target CEOs are more likely to be replaced or leave within five years after the takeover (Lambert and Larker 1985) and that they tend to fail to find a similar position in public firm within three years after the takeover (Agrawal and Walkling 1994).
Assume that current management expects to stay with the firm until retirement, let (Lev and Schwartz 1971) represent the summation of their “stream of future compensation” up until their expected retirement time where r represents the CEO’s personal discount rate. The possibility of a lost stream of future compensation due to a future takeover of the firm and potential severance is the potential cost to management for making this decision.
We will show that good managers are more efficient managers (in terms of ROA), that good managers will signal their quality via divestiture announcement and that the market will acknowledge their signal with a positive change in stock price.
Status:
On-Going
Research Type:
Scholarly
