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• Working Paper | HBS Working Paper Series | 2019

  Core Earnings: New Data and Evidence

  Ethan Rouen, Eric C. So and Charles C.Y. Wang

  Using a novel dataset that comprehensively classifies the quantitative financial disclosures in firms' 10-Ks, including those hidden in the footnotes and the MD&A, we show that disclosures of non-operating and less persistent income-statement items are both frequent and economically significant, and increasingly so over time. Adjusting GAAP earnings to exclude these items creates a measure of core earnings that is highly persistent and that forecasts future performance. Street earnings for firms that meet or just beat analyst expectations are more likely to selectively exclude these items. Analysts and market participants also are slow to impound the implications of these items. Trading strategies that exploit cross-sectional differences in firms' transitory earnings produce abnormal returns of 7% to 10% per year.

  Keywords: core earnings; transitory earnings; non-operating earnings; quantitative disclosures; Equity Valuation; big data; Business Earnings;

  Citation:

  Rouen, Ethan, Eric C. So, and Charles C.Y. Wang. "Core Earnings: New Data and Evidence." Harvard Business School Working Paper, No. 20-047, October 2019. (Revised November 2019.)  View Details

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• Case | HBS Case Collection | March 2018 (Revised September 2019)

  China Vanke: Battle for Control (A)

  Lynn S. Paine, Charles C.Y. Wang, Dawn H. Lau and Anthony K. Woo

  In June 2016, the board of China Vanke, one of China’s largest and best-known private residential real estate developers, must vote on a proposed acquisition that is opposed by its largest shareholders, state-owned China Resources Co. and the lesser-known property developer and financial services company Baoneng. The case describes how Baoneng amassed enough shares in Vanke to become its largest shareholder, displacing China Resources in that position. In response to Baoneng’s unwelcome advance and in support of its “railway plus property” strategy, Vanke’s management has proposed the acquisition of a unit of Shenzhen Metro, the government-owned operator of Shenzhen’s underground subway. The proposed acquisition, to be financed by issuing shares, will make Shenzhen Metro Vanke’s largest shareholder and dilute the holdings of both China Resources and Baoneng. China Resources has publicly expressed misgivings about the transaction and the board’s handling of its announcement. With three out of the 11 board seats occupied by China Resources affiliates, and a two-thirds majority needed for the proposal to pass, the vote would determine the future of Vanke.

  Keywords: China Vanke; China Resources; Hostile takeover; board of directors; shareholding structure; shareholder rights; asset restructuring; Corporate Governance; Governing and Advisory Boards; Valuation; Business and Shareholder Relations; Real Estate Industry; China;

  Citation:

  Paine, Lynn S., Charles C.Y. Wang, Dawn H. Lau, and Anthony K. Woo. "China Vanke: Battle for Control (A)." Harvard Business School Case 318-117, March 2018. (Revised September 2019.)  View Details

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• Case | HBS Case Collection | July 2013 (Revised September 2019)

  Say on Pay: Qualcomm, Inc. Shareholders Vote 'Maybe'

  Suraj Srinivasan, Charles C.Y. Wang and Kelly Baker

  This case centers around Qualcomm shareholders' 2012 Say-on-Pay vote and the dispute between the Institutional Shareholder Services and management regarding the appropriateness of the CEO's compensation plan. Was ISS right that Qualcomm's CEO's pay was inflated and justified by benchmarking to aspirational peers? Or was management correct that its CEO's pay is warranted by Qualcomm's recent firm performance?

  Keywords: ISS; proxy advisor; investor communication; investor relations; peers; Say-on-Pay; benchmarking; peer group; compensation committees; board of directors; Governing and Advisory Boards; Executive Compensation; Corporate Governance; Business and Shareholder Relations; Telecommunications Industry;

  Citation:

  Srinivasan, Suraj, Charles C.Y. Wang, and Kelly Baker. "Say on Pay: Qualcomm, Inc. Shareholders Vote 'Maybe'." Harvard Business School Case 114-005, July 2013. (Revised September 2019.)  View Details

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