Seminar on Firm Fundamentals


The seminar is open to Master students.

To successfully pass the seminar you need to write a paper and give a presentation. Papers can be written in either German or English and should be of 15-20 pages as a team of two and 20-25 pages as a team of three. For hints how to write a paper see our guidelines. You need to hand in a printed version and also a digital one (PDF). The seminar talks should be given in English. You will have to present around 45 minutes including discussion.

For each topic, you should provide a short literature survey (here you should consider more than your intro-paper(s)) and you will also have to work on a practical part in which you should get familiar with empirical analysis (accessing data over Datastream or Bloomberg, performing quantitative analyses). You will need to use a data analysis tool (e.g. Excel, R, Matlab, etc.). 

Please contact your supervisor to discuss the outline of your paper, your empirical part, and any questions that you may have. For organizational questions, please ask Nino Papiashvili.

FAQ & Organisational matters

  • Do we get a grade? Yes. Your paper and your presentation will be graded and lead to one grade (equally weighted). Both the paper and presentation have to be passed.
  • What do we have to hand in? An outline of your paper to discuss the content of your paper and your final paper one week before the presentation.
  • Who is responsible? For content-related questions, please contact your supervisor. For organizational questions, please ask Nino Papiashvili.

Time Table

Date Time & Place Matter  
03.02.2016 6.00 pm, HeHo E20 Allocation of topics  
by 25.04.2016 - Meet your supervisor to discuss the outline of the paper  
23.05.2016 - Registration at the Higher Services Portal  
06.06.2016 until 11 am, Heho 18, 1.03 (Rieber) Submission of the paper  
14/15.06.2016 Villa Eberhardt Presentations  


1. Firm Transparency and its Effect on Stock Liquidity

Transparency is assumed to reduce uncertainty about fundamental value. Stocks with greater transparency experience fewer cases of extreme illiquidity. The effects are significantly more pronounced during crisis periods. You should do an empirical analysis similar to Lang & Maffett (2011) using a representative data on US public firms.

Literature to start with:

Lang, M., & Maffett, M. (2011). Transparency and liquidity uncertainty in crisis periods. Journal of Accounting and Economics, 52(2), 101-125.

Students: Hongtao Chen, Yuqi Jin & Hongyan Zhu

Supervisor: Nino Papiashvili


2. The Quality of Financial (Earnings) Reporting

You should review the commonly used proxies of earnings quality. Comment on what fundamental performance do they measure or fail to measure. Employing a representative sample of US public firms you should construct the proxies of earnings as in the references provided and evaluate them.

Literature to start with:

Jones, K. L., Krishnan, G. V., & Melendrez, K. D. (2008). Do Models of Discretionary Accruals Detect Actual Cases of Fraudulent and Restated Earnings? An Empirical Analysis*. Contemporary Accounting Research, 25(2), 499-531.

Dechow, P., Ge, W., & Schrand, C. (2010). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics, 50(2), 344-401.

Students: Anna Kehl, Varduhi Khachatryan & Elena Kireeva

Supervisor: Nino Papiashvili


3. Earnings Quality and Cost of Capital

Earnings quality is found to negatively affect the expected cost of capital. You should conduct an empirical analysis of this relationship on a representative sample of US firms taking Barth et. al. (2013) approach as a reference.

Literature to start with:

Barth, M. E., Konchitchki, Y., & Landsman, W. R. (2013). Cost of capital and earnings transparency. Journal of Accounting and Economics, 55(2), 206-224.

Bhattacharya, U., Daouk, H., & Welker, M. (2003). The world price of earnings opacity. The Accounting Review, 78(3), 641-678.

Students: Ekaterina Saenko, Leonid Hurnik & Andrey Staroverov

Supervisor: Nino Papiashvili


4. The Implied Cost of Capital

You should search the literature and summarize the methods of estimating the implied cost of capital. As a second task, you should apply some of the methods of your choice for the representative sample of US stocks.

Literature to start with:

Hou, K., Van Dijk, M. A., & Zhang, Y. (2012). The implied cost of capital: A new approach. Journal of Accounting and Economics, 53(3), 504-526.

Students: Sijia Ren, Oyelekan Olorunkosebi & Muhideen Bamgbala

Supervisor: Nenad Curcic


5. Can Accounting Information Forecast Future Firm Performance?

You should conduct an empirical analysis on the predictive power of firm fundamentals (income statement and balance sheet items) of stock returns using similar approach as in the references. You should use a representative sample of US public companies and extend the analysis to a more recent period.

Literature to start with:

Francis, J., & Schipper, K. (1999). Have financial statements lost their relevance?. Journal of accounting Research, 319-352.

Hail, L. (2013). Financial reporting and firm valuation: relevance lost or relevance regained? Accounting and Business Research, 43(4), 329-358.

Students: Johannes Wrede, Johannes Weiss & Clara Franke

Supervisor: Nino Papiashvili


6. Textual Analysis of Firm Related Announcements and its Informational Value

You should review the literature on the language usage and tone management in corporate related announcements, its relation to firm fundamentals and effect on valuation. You should understand the methodology used in the references and conduct your own analysis by taking a sample of US firms and evaluating the tone of their ad-hoc press announcements.

Literature to start with:

Tetlock, P. C., Saar-Tsechansky, M. and Macskassy, S. (2008). More than words: Quantifying language to measure firms' fundamentals. The Journal of Finance, 63(3), 1437-1467

Xuan Huang, Siew Hong Teoh, and Yinglei Zhang (2014) Tone Management. The Accounting Review, 89(3), 1083-1113

Loughran, T. and McDonald, B., 2014. Measuring readability in financial disclosures. The Journal of Finance, 69(4), 1643-1671.

Students: Dominik Schuhmann, Markus Voigt & Roger Gröschel

Supervisor: Alexander Rieber


7. Analysts Adjustment to Reported Earnings

You should review the literature on how analysts adjust firm reported earnings, if this adjustments are justifiable and have better informational value. You should take a representative sample of US firms for a more recent period and compare their GAAP earnings with (analyst) adjusted earnings; you should also evaluate the value relevance of the two earnings measures using similar approach as in Bradshaw & Sloan (2002).

Literature to start with:

Bradshaw, M. T., & Sloan, R. G. (2002). GAAP versus the street: An empirical assessment of two alternative definitions of earnings. Journal of Accounting Research, 40(1), 41-66.

Barker, R., & Imam, S. (2008). Analysts’ perceptions of ‘earnings quality’. Accounting and Business Research, 38(4), 313-329.

Students: Hanisha Gulati, Syed Hussain & Prateek Jain

Supervisor: Nino Papiashvili


8.  Firm Fundamentals in Emerging Markets

Stocks in emerging markets are in the focus of academics because they are supposed to have different characteristics compared to stocks in established stock markets. For example, stocks in emerging markets have been found to have higher volatility and higher serial correlation. Summarize the findings on the valuation of emerging market stocks and update the analysis from Rahman and Hassan (2013) for the Chinese stock market.

Literature to start with:

Rahman, A. and Hassan, K. (2013): Firm fundamentals and stock prices in emerging Asian stock markets: some panel data evidence; Review of Quantitative Finance and Accounting 41; 463-487.

Students: Jonas Duske, Christoph Maier & Bruno Coêlho

Supervisor: Maximilian Franke


9. R&D and Future Stock Returns

Some earlier studies like Lev and Sougiannis (1999) find a positive relation between R&D activity and future stock returns explaining it with increased risk or mispricing. Donelson and Resutek (2012) provide a third explanation, namely the excess returns of R&D firms are part of the value-to-growth anomaly. Your task is to give a literature overview on the relation of R&D and future stock returns and to replicate the empirical work from Donelson and Resutek (2012) for the German market.

Literature to start with:

Donelson, D. and Resutek, R. (2012): The effect of R&D on future returns and earnings forecasts; Review of Accounting Studies 17; 848-876.

Lev, B. and Sougiannis, T. (1999): Penetrating the book-to-market black box: The R&D effect; Journal of Business & Accounting 26; 419-449.

Students: Diana Osnos, Gabriel Arpio & Inga Juhl

Supervisor: Maximilian Franke


10. Growth or Glamour? Fundamentals and Systematic Risk in Stock Returns

Value and growth stocks are exposed to different cash flow risks. The cash flows of growth stocks are particularly sensitive to temporary movements in aggregate stock prices, driven by shocks to market discount rates. Whereas the cash flows of value stocks are particularly sensitive to permanent movements, driven by shocks to aggregate cash flows. Thus the economic origins of systematic risks are different for value and growth stocks. In this seminar you should do an empirical analysis to test if the difference between value and growth stocks is indeed due to the different origins of systematic risk, following Campbell et. al. (2009).

Literature to start with:

Campbell, J. Y., Polk, C., and Vuolteenaho, T. (2009). Growth or glamour? Fundamentals and systematic risk in stock returns. Review of Financial Studies, 23(1), 305-344.

Students: Tobias Lauter, Igor Neumann & Kelvin Tibie

Supervisor: Alexander Rieber