Harm Henning Schütt
Harm is a Ph.D. Candidate in Accounting at the Haas School of Business, University of California at Berkeley. Prior to joining the Ph.D. program, he started his professional career at Sal Oppenheim in Germany, working as a sell-side equity analyst and covering German mid-cap stocks.
The effect of accounting mechanics on investors’ expectations about future earnings and the resulting implications for financial statement analysis, fundamental valuation, and capital markets regulation.
Job Market Paper - Do Analysts Understand the Relation between Investment Intensity and Earnings Growth?
Abstract: If investments are linked to revenues, then earnings growth is mechanically related to changes in the ratio of investments to sales (investment intensity). Unconditional conservatism increases both the negative relation of current changes as well as the positive relation of past changes in investment intensity with changes in earnings growth. In this study, I provide theoretical and empirical support for this relation and investigate whether the predictable component is anticipated by analysts. I find that the magnitude of the relation is economically significant – a 1% change in last year's investment intensity leads to a change in earnings growth of 1.5% for the highest conservatism quintile – and that analysts do not fully factor in the impact of last year's change in investment intensity, leading to predictable forecast errors. The analysis adds to the literature on the effects of conservatism on earnings quality as well as the literature on functional fixation.
Other Working Papers
The Matching Principle’s Usefulness to Investors: A more timely Return on Investment
Do LBOs Add Value by Improving Operating Profitability? with Brian Ayash
The Conservative Nature of Loan Loss Reserves – Distortions by Poor Matching? with Malachy English and Aydin Uysal