Examine the effect releasing accounting information can
have on the valuation (i.e. share price) of an Australian-listed company. The project
has three educational objectives:
i. To demonstrate that, in some cases, accounting-related information has an
impact on investor behaviour via the share prices (or returns, which are changes
in share price).
ii. To show how we have to control for the effects of other factors when trying to
assess causal relationships. In this case, movements in the market must be
controlled for in order to see the real effect of a company profit announcement
on the share price of the company.
iii. To encourage initiative, inquisitiveness and the development of basic financial
statement analysis skills as students investigate company-specific factors
behind the economic performance being announced by the company.
Requirements
This is an individual task that is designed to build your research, analysis and writing
skills. This project will require you to use online databases to search and obtain
announcements by companies, share price histories for companies and market wide
information.
You will also utilise the key business desk top analysis tool, “Excel”, to manipulate the
data you obtain to calculate, analyse and produce graphical representations of the key
information.
You may like to refer to the course textbook by Horngren Accounting (8th Ed.), giving
emphasis on the contents of Chapter 18 Financial Statement Analysis, to evaluate and
put into context the factors behind the profit results announced by the company.
Suggested Structure of Report
- Title page
- Objectives of the report
- Overview of industry and company.
• A brief overview of the industry and your company is required to ‘set the
scene’ for the reader. - Overview of the announcement and expected impact
• Introduce the announcement, give a succinct summary of the key financial
and, if applicable, non-financial elements.
• Provide a justified expectation of the impact of the announcement on your
company’s share price (up or down, good news/ bad news etc). Be sure to
discuss what YOU THOUGHT should happen based on the announcement
and not a rationalisation of what did happen - A discussion and analysis of the actual stock market reaction and
calculation of residuals.
• What actually happened around the date the announcement was released
to the share price of your company and its competitors.
• Use your residual calculations to support your observations.
• Explain what the residual graph is presenting to the audience.
• This section will include the presentation of your cumulative residual
graphs with a discussion on their importance and usefulness.
• If not what was expected, what are some reasons for the difference?
• Does the industry your company and its competitors operate affect the
residual results or expectations?
• You can include information from company announcements, reports, news
articles, graphs etc. to support your discussion.
• Any graphs that appear within the body of the report require appropriate
formatting and labels.
• You do not need to include tables of formulas from Excel in your written
report. - Conclusion
• Your conclusion should address your report’s objectives and be fully
supported by your report content. Do not introduce new ideas in the
conclusion.
Other factors affecting your grade include: - References and appendices
• APA style is preferred. Referencing guides can be found at:
http://www.bond.edu.au/library/tools/cite/index.html
• Your attention is drawn to the faculty’s plagiarism policy, which is accessed
through the Bond website.
• Appendices are graphs, tables and other supporting data that are
supplementary to the main discussion but do not belong in the main body
of the report. - Presentation and writing style
• Is your report appropriately formatted, written and presented (for example,
12-point font, 1.5-line spacing)?
• Does the report have a suitable flow and structure?
• Have you used the correct terminology and vocabulary in context?
• Are your graphs, tables, pictures and/or figures readable, labelled and used
appropriately?
• Have you corrected minor errors in your report during the proof reading
process?
• Exceeding the word count may result in penalties.
Project Requirements Checklist
Your project consists of your written report (Word document) covering the items as
shown above.
You are required to use an Excel file for calculations and for the generation of graphs.
Name your PDF copy of the profit announcement with the name of the company the
announcement refers to.
There are TWO drop boxes in which to submit your work. - Individual Event Study DROPBOX (203)
• Submit a digital copy of your report (Word document, .doc or .docx ONLY) to this
Turnitin drop box via the link on iLearn, found under the “Assessment” menu.
• Everyone must submit their report via Turnitin. EMAIL COPIES WILL NOT BE
ACCEPTED. - Supporting Documents – DROPBOX (203)
• Submit files that support your assignment. For example, a PDF copy of report,
Excel, PDF copy of the announcement and any other material you deem
necessary.
• Before submission, check first that you have all the required files, named as
instructed above, and that you have only ONE excel file containing all of the
downloaded data and calculations.
(If you have any problems with this submission process, then email all of your files to your
Instructor before the deadline. Reports will still have to be submitted through Turnitin
but they will be checked against your email submission.)
Useful Resources
Suggested sources to find out more information about the profit announcement and
mind map.
• Factiva (newspaper database)
Accessed via Bond website: https://library.bond.edu.au Library / Electronic
Resources / Business / Factiva.
Search major Australian and NZ newspapers using key words to find relevant
profit articles. (Note: this database can be tricky and you are advised to seek a
librarian’s assistance).
• Australian Stock Exchange (www.asx.com.au)
• Bloomberg terminals
Library – 3 terminals
Trading Room – Room 1b_1_85
Dealing Room – Room 1b_1_89
• Mainstream and Financial Press
For example:
o The Financial Review
o The Australian
o Brisbane Times (brisbanetimes.com.au)
o News.com.au
• Company Website
You can find additional data on your chosen company’s website.
Sample Solution
