Bridge over ocean
1 March 2004 Financial Analysts Journal Volume 60, Issue 2

Long-Run Stock Returns Following Briloff's Analyses

  1. Hemang Desai
  2. Prem C. Jain

Abraham Briloff is well known for more than four decades of insightful analysis and criticism of the accounting practices of various companies. His critiques, in the form of articles published in Barron's, consist of detailed financial analyses of the questionable accounting practices of the companies he examines. Previous research has shown that the companies criticized by Briloff in Barron's experience significant negative abnormal returns around the article's publication date. To understand the valuation effect associated with his financial analyses, this article examines long-run abnormal returns following the publication date. In addition to the initial negative reaction on publication of the articles, the companies in the sample experienced further significant risk-adjusted returns for one and two years of, respectively, −15.51 percent and −22.88 percent. The results show that a decline in future operating performance appears to be an important reason for the poor stock market performance of the companies. Thus, Briloff could apparently foresee the coming decline in operating performance better than the market could. These results underscore the importance of understanding a company's accounting and of the role of careful financial statement analysis.

Read the Complete Article in Financial Analysts Journal Financial Analysts Journal CFA Institute Member Content

We’re using cookies, but you can turn them off in Privacy Settings.  Otherwise, you are agreeing to our use of cookies.  Accepting cookies does not mean that we are collecting personal data. Learn more in our Privacy Policy.