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A study of the market behavior in response to the liquidation of LIFO layers
Abstract
Using the matched pair technique, two samples were used to evaluate the joint effect of two factors on the behavior of common stock prices. These two factors were (1) the decision by a firm to liquidate or not to liquidate LIFO inventory layers, and (2) the sign of the expected growth in earnings per share (EPS) as forecasted by security analysts, here the IBES group. A submartingale process relating to actual earnings was assumed. The market model was incorporated to calculate the direction of the expected movement of common stock prices. The findings in this study appear to support the hypothesis that the decision to liquidate or not to liquidate LIFO inventory layers is given different interpretations by the securities market depending on the sign of expected growth in EPS. The results suggest that various intervening variables mediate between based information and the behavior of the securities market when LIFO layer liquidation occurs. The final conclusion is that various intervening variables have the power to alter the interpretation of the same accounting information.
Subject Area
Accounting
Recommended Citation
Filter, William Viggo, "A study of the market behavior in response to the liquidation of LIFO layers" (1990). ETD collection for University of Nebraska-Lincoln. AAI9030118.
https://digitalcommons.unl.edu/dissertations/AAI9030118