Sudhakar V. Balachandran

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This paper tests whether a strategy based on financial statement analysis of low book-to-market (growth) stocks is successful in differentiating between winners and losers in terms of future stock performance. I create an index (G_SCORE) based on a combination of traditional fundamentals such as earnings and cash flows and measures appropriate for growth(More)
Prior research shows that firms generating earnings growth by improving profitability create shareholder value, while firms generating earnings growth through investment destroy value. This paper examines whether compensation committees consider this while determining CEO compensation. We first confirm prior results that growth from increased profitability(More)
The effect of executive compensation on extreme risk is frequently cited as a leading candidate for the financial crisis. The evidence for or against is scarce. This paper assembles panel data on 117 financial firms from 1995 through 2008, using the financial crisis as a type of ‘stress test’ experiment to determine the relation of equity-based incentives(More)
Recent corporate scandals and subsequent regulatory actions have heightened both the academic communities and the public’s interest in corporate governance issues. Academics have long argued that voting rights constitute a critical component of a system of corporate governance. We provide evidence on the importance of one aspect of the firm’s corporate(More)
This paper examines the association between conservatism and value relevance of accounting information. Prior literature (Lev & Zarowin 1999) has suggested that conservative accounting, especially the treatment of advertising and R&D, as one possible reason for decreasing value relevance. We measure conservatism using a variety of approaches in the extant(More)
Prior research found that residual income (RI) is not as informative about stock returns as net income (NI), despite theory that demonstrates the role of residual income in valuation and a long history support for RI among practitioners. We replicate these tests and find similar results. We then consider an alternate perspective of viewing NI and RI not as(More)
In this paper, we use the definition of residual income to develop a framework that decomposes changes in net income into different components. The two components we focus on are the change in net income driven by investment (investment-driven growth), and the change in net income driven by improvements in the productivity of existing assets(More)
Prior research found that Residual Income (RI) is, at best, minimally informative about stock returns relative to Earnings, despite strong support for RI in theory and among practitioners. We examine three possible explanations for this puzzle. First, the empirical literature ignores some salient feature of practice or theory. Second, the market does not(More)
This paper examines the association between conservatism and the value relevance of accounting information. We measure the conservatism by using approaches developed in Penman and Zhang (2002) and Beaver and Ryan (2000). We examine the relationship between our measures of conservatism and the value relevance of accounting, at both the firm and industry(More)
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