Key words: earnings quality, auditor industry specialization, forecasting and valuation, stock markets

"Earnings Properties: The Role of Industry and Life Cycle Fundamentals"

This dissertation examines how industry and firm life cycle fundamentals affect and determine future firm performance. The three empirical studies broaden our understanding of how current earnings information can be used to improve profitability forecasts and firm value estimates. Results of the first study show that auditors who specialize themselves in a certain industry may not always be associated with higher quality audits, as auditor industry specialization comes, on average, at the expense of the informativeness of firms’ accruals for future cash flows. The second and third study address the impact of industry and life cycle fundamentals on the persistence of earnings information, i.e., the extent to which current year’s earnings recycle into next year’s earnings, and how these persistence differences are subsequently used by acquirers, investors, and analysts in forecasting and valuation.