A theoretical and empirical study of computing earnings per share

Simple item page
dc.contributor.advisorKim, Oliveren_US
dc.contributor.authorZhang, Meien_US
dc.contributor.departmentBusiness and Management: Accounting & Information Assuranceen_US
dc.contributor.publisherDigital Repository at the University of Marylanden_US
dc.contributor.publisherUniversity of Maryland (College Park, Md.)en_US
dc.date.accessioned2008-08-07T05:33:01Z
dc.date.available2008-08-07T05:33:01Z
dc.date.issued2008-08-04en_US
dc.description.abstractIn this dissertation, I propose a theoretic foundation to compute earnings per share (EPS) for firms with both common shares and dilutive securities outstanding. I derive a new EPS measure, market EPS, which is defined as the expectation of the future earnings per share. From the view of investors, market EPS naturally captures EPS information in stock prices. It is compared to basic EPS and diluted EPS, which are suggested in the dual presentation under the current U.S. rule. The comparisons show that market EPS is below the range defined by basic EPS and diluted EPS as long as the expected future abnormal earnings is zero. This indicates a weakness behind the thinking of the current rule. I also find that the diluted EPS by the treasury stock method overstates market EPS more than that by the if-converted method. In addition, given all conditions the same, the upward bias of diluted EPS of growth firms is smaller than that of non-growth firms. To support the proposed theory, I conduct an empirical study using a dataset containing 3130 firm-year employee stock option plans from 1997 to 2006. The results show that diluted EPS under the rule is, on average, larger than market EPS by 1%. Furthermore, the bias is larger for firms that are heavy users of employee stock options and for firms that have higher earnings volatility.en_US
dc.format.extent683426 bytes
dc.format.mimetypeapplication/pdf
dc.identifier.urihttp://hdl.handle.net/1903/8360
dc.language.isoen_US
dc.subject.pqcontrolledBusiness Administration, Accountingen_US
dc.subject.pqcontrolledBusiness Administration, Accountingen_US
dc.subject.pquncontrolledEarnings per shareen_US
dc.subject.pquncontrolledDiluted EPSen_US
dc.titleA theoretical and empirical study of computing earnings per shareen_US
dc.typeDissertationen_US

Files

Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
umi-umd-5666.pdf
Size:
667.41 KB
Format:
Adobe Portable Document Format
Download

Collections

UMD Theses and Dissertations
Accounting & Information Assurance Theses and Dissertations