User:Thoff096/Michael B Clement, Ph.D., MBA, BBA

Michael B Clement, Ph.D., MBA, BBA 

Biography:
• Associate Professor at McComb School of Business since 1997

• BBA from Baruch College in 1980

• MBA from University of Chi

• PhD from Stanford University in 1997

• KMPG Faculty Fellow in Accounting Education

• Research interests include financial accounting, security analysis, financial markets and statement analysis

• Co-wrote 11 publications

Academic Research Publications
Stock Market Valuation of Brands, Mary Barth, Michael B. Clement, George Foster and Ron Kasznik (Stanford University), Review of Accounting Studies, 3: 41-68 (1998).

Summary of Article:

Although brand names are important intangible assets of many firms, U.S. GAAP does not permit firms to recognize internally developed brands as accounting assets. A major reason for not according these assets financial statement recognition is concern about whether their values can be reliably estimated. The study examined whether brand values estimated and published by a well-respected financial magazine [FinancialWorld (FW)] reflect valuation relevant information and are sufficiently reliable to be reflected in share prices and returns.

Conclusions:

Taken together, the findings indicate that the FW brand value estimates capture information that is relevant to investors and are sufficiently reliable to be reflected in share prices and returns. Whether their reliability is sufficient to merit financial statement recognition is left to accounting standard-setters to determine.

Critique of Article:

The article appears to be well-referenced. However, half of the references are from the same authors: D.A. Aaker (three times), M.E. Barth (six times, also co-author of the paper) and FInancialWorld (six times). This reduces the quality of the article’s references. Contrary to Elliot’s Third Wave article, the diagrams Clement et al. use actually add to the comprehension of the paper. The formulae used are quite complex and the graphs and tables provided help readers understand the material.

An area of concern is the source for the brand value estimates. Interbrand, a brand valuation firm, provides these estimates. Perceived bias would be reduced if a more impartial source was used.

'Confirming Management Earnings Forecasts, Earnings Uncertainty, and Stock Returns Michael Clement, Richard Frankel and Jeffery Miller, Journal of Accounting Research, 41'

Summary of Article:

This paper examines the association between confirming management forecasts, stock prices and analyst expectations. Confirming management forecasts are voluntary disclosures by management that support market expectations that already exist for future earnings. Prior studies have examined the effects of disclosure policies on the pricing of a firm’s securities, but this study extends such prior research by using an event-study design. An event-study design is a statistical method that evaluates the effects of an event on the value of a firm. This study also adds to management forecast literature by investigating the effect of forecasts on investor uncertainty about future earnings by documenting the uncertainty reducing effects of forecasts with a minimal surprise component.

This study examines four areas:

1.Stock price reactions to confirming forecasts

2.Effect of confirming forecasts on analyst forecasts of future earnings

3.Effect of confirming forecast on analyst forecast uncertainty

4.Regression of relation among return, uncertainty reduction, and firm size

Conclusions:

The main finding from the study is that stock prices react positively to management earnings forecasts that confirm market expectations. It was also concluded that price reaction is larger for smaller firms. The author indicates that this study is a first step towards examining how the effects of forecasting on the reduction of earnings uncertainty and cost of capital. Studies examining the benefits of disclosure are also to be considered in the future.

Critique of Article:

First, we must ask ourselves who the co-authors are. The co-authors are Richard Frankel and Jeffrey Miller. Richard Frankel is a professor at the Washington University in St.Louis in the Olin Business School. His research interests are accounting-based valuation and voluntary disclosures. Jeffrey Miller is an associate professor in the Accountancy Department at Notre Dame. His other research also examines the informativeness of discretionary managerial disclosures to security prices and investor judgments.

Other aspects to consider are the references, methodology, and evidence. In this particular article, the references are numerous and contain much detail, including footnotes and page numbers. The article also provides a detailed methodology that outlines the methods used for attaining data as well as constraints and reasons for exclusions from samples. Finally, the authors provide empirical evidence. Data is provided and neatly organized into tables.

'Do Investors Respond to Analysts’ Forecast Revisions as if Forecast Accuracy is All That Matters? Michael B. Clement, Senyo Y. Tse, The Accounting Review, 78, 227-249(2003)'

Summary of Article:

This article tries to prove whether there is more that goes into an investor’s response to analysts’ forecast revisions as if forecast accuracy is not all that matters. Prior research suggests that an investor’s response to analyst forecast revisions increases with the forecast accuracy. Yet, Michael Clement digs deeper by examining whether investors appear to gather all the information that analyst characteristics provide about forecast accuracy. After extensive research, he found that only some of the analyst characteristics that are associated with future forecast accuracy are also associated with forecast revisions and thus concludes that investors fail to extract all relevant information about forecast accuracy. He goes on to talk about how there are other forecast properties other than expected accuracy that have relevance; such as: the tendency for investors to respond stronger to forecasts released earlier in the year and broker size. For example, forecast with longer horizons tend to be less accurate than forecast’s with shorter horizons, therefore investors respond greater to the earlier forecasts. This is closely related with the level of uncertainty about earnings. Clement concludes here that there is a trade-off between accuracy and timeliness.

Results:

Clements’s results suggest that investors form earnings expectations using more complex procedures than simply averaging all analysts’ forecasts. Clement also leaves open the possibility that different types of investors weigh analysts’ characteristics differently when responding to forecast revisions.

Conclusions:

Clement then concludes that investors responses to analysts’ forecast revisions is not solely influenced by forecast accuracy, but rather a combination of forecast properties go into an investment decision such as timeliness, broker size and other value-relevant forecast characteristics that play an essential role in how investors respond to forecast revisions.

Critique of Article:

This article is of fairly high quality. Firstly, Dr. Clement takes information from many previous studies and builds on them in his own. While doing this he comes to similar conclusions as the previous studies and also comes to his own conclusions that elaborate on previous findings. This shows that the topic of the article has validity as separate studies are able to have comparable results. Secondly, the article states a very detailed methodology and research design. This shows that much thought was put into how to prove the results empirically, rather than just state opinions without any back up information. Dr. Clement makes use of mathematical models in his article to prove his points as well as conducting statistical analysis and sensitivity analysis. Finally, the article cites many sources that Dr. Clement referenced for his research. All of his references come from accounting and finance journals, and many of them are included as a basis for the study discussed in the article.

Summary of Michael B Clement and his publications
Each of these articles addresses factors that can influence investor’s decisions. The first article deals with value of a brand in relation to the value of a company’s stock. The second article discusses how management reaction to forecasts can influence stock price. Finally, the third article shows how investors are concerned with timeliness of forecasts as well as the size of brokerage firms when they make decisions.

Michael Clement has participated in many studies and contributed much to accounting research. If you would like more information on him and his work, visit his website at the University of Texas, as well as the Wikipedia page we have created.