A Reevaluation of the Work of William Beaver in 1968


  • Zach Williams
  • Leslie L. West Hampton University




This study evaluates the pivotal work of Beaver (1968) that demonstrated the value and timeliness of financial statements. This paper discusses the original study by Beaver (1968), assesses the literature in the field since 1968, and conducts a study that fills three important gaps in the research area of information content of financial statements. The key test is an analysis of variance (ANOVA) test that compares the trading volume of a firm 30 days prior to an earnings announcement with the trading volume of that firm for 10 days after the announcement. This study concludes that between 61.81% and 64.85% of all firms report financial information that is both timely and valuable. The first research gap that this study fills is the need for ongoing testing of the information content of financial statements as the financial markets and the field of accounting are constantly evolving. This study fills a second gap in the research by explaining variance in the post-announcement drift of individual firms. This study fills a third gap in the literature by providing a percentage estimate of all firms that provide timely and valuable information content. This third contribution may prove to be useful to future research as this classification of firms could be used as a platform to define the characteristics of individual firms that do or do not report financial information that is both timely and valuable.