Our speaker will be Jack Stecher (Alberta School of Business).

He will giva a talk on "Coherent Classification and Signaling".

The talk will take place at 12:00-13:00 in seminar room D4.4.008.

Abstract: We investigate whether classifying line items as core earnings or as special items can signal their persistence. Although persistence is soft information, classifications inform investors, because it may be possible to confirm the ranking of items by persistence. If a firm respects persistence ranking in its classifications, we call the classifications coherent. We show that requiring coherence explains important empirical regularities: firms disproportionately classify losses as special items, and investors respond more to negative than to positive special items. Nevertheless, the classifications reveal as much information as possible. This suggests the harm to investors of classification shifting may be overstated.