ACCT317 Managerial Accounting

Prof. Larcker Spring 2020

Before You Get Started on the Empirical Project — Tip From the Librarians

You want to verify as soon as possible that 1. your data are available and that 2. you can build your data set in a reasonable amount of time. If you wait until the last minute, either of those things could go wrong, and you can’t do any empirical analysis until your data set is built (plus you likely wasted time doing a literature review for an unusable topic).

Step 1 Identify firms based on a corporate governance, executive compensation, etc. factor/criteria. Then obtain the tickers of your selected firms in order to analyze their stock returns and/or financial statements.

Build a list of tickers for the public companies you want to study, based on your criteria (a corporate governance measure, executive compensation factor, etc.). Then download the resulting tickers for Step 2.

The databases profiled below — Capital IQ, Audit Analytics, ISS, MSCI KLD, MSCI GMI, Execucomp — can be used to create a list of firms to analyze.

You may apply for a Capital IQ account or use the public machines in the RAIL Lab (B312) or the Trader’s Pit of the GSB Library. Audit Analytics, ISS and MSCI are all WRDS databases, available with via temporary day pass or by applying for a long term WRDS account. To obtain a day pass, access any of the WRDS databases and apply (WRDS databases are available via the Library’s A-Z database list.)

Selected Corporate Governance Databases

Capital IQ

How to access: You may apply for a Capital IQ account (the vendor only allows accounts to be processed once a week on Wednesdays) or use the public machines in the RAIL Lab (B312) or two computers in the Trader’s Pit of the library (ground floor of Bass). See database entry.

Content: Capital IQ tracks hundreds to variables about a public company. The video below screens for companies that have poison pill provisions as part of their corporate governance.

Screening: To screen companies by criteria, select Screening at top, then select the criteria you need. View results, then customize display to generate list of tickers; a search examples is provided below.

Video Tutorial

Go to A-Z database list and select Capital IQ

  1. Select Screening, at top
  2. Select Transactions
  3. As an example, select Takeover Defenses – Active Poison Pill -- Yes
  4. Add Criteria
  5. View Results
  6. Download to Excel
  7. View Results
  8. Create Text file of tickers

Cleaning up Capital IQ tickers for Step 2 - In your output, the exchange and ticker will appear in the same column.

NASDAQGS:MSFT
NYSE:GE
NYSE:F

To format correctly for Step 2, remove the exchange info.

MSFT
GE
F

Audit Analytics (WRDS)

Content: Tracks variables such as restatements or auditor changes.

In Audit Analytics you can search Auditors or Auditor Changes, for example. Audit Analytics and other WRDS databases have basically the same searching mechanism, standardized throughout WRDS.

Video Tutorial

Access Audit Analytics

  1. Select Auditor Changes
  2. Set Date Range, as appropriate
  3. Go to Browse and upload text file of tickers (NOTE: in the video, we search the entire database)
  4. Select Ticker for applying company codes
  5. Browse – upload saved ticker text file
  6. Select display items, e.g. company name, best EDGAR ticker
  7. Generate output, e.g. CSV (comma delimited)

Institutional Shareholder Services (WRDS)

Governance data on classic takeover defense and other corporate provisions, e.g. poison pills, and Shareholder Proposal issues that came to a vote.

MSCI ESG KLD STATS (WRDS)

Content:  In-depth research, ratings and analysis of environmental, social and governance-related business practices to companies worldwide. 

Since 2010 many variables are scored on a 0--10 scale, with 0 representing no exposure and 10 representing very high exposure.

If the variable is scored on a 0--1 scale, then =1 indicates exposure and =0 indicates no exposure

Video Tutorial

Access MSCI KLD

  1. Select MSC ESG KLP Stats
  2. Select Social Ratings
  3. Select Date Range, as appropriate
  4. Go to Browse and up upload ticker text file (NOTE: in this example, we are searching entire database)
  5. Select display variables, e.g. company name, ticker, employee health and safety
  6. Go to Output, e.g. CSV (comma delimited)

MSCI GMI Ratings (WRDS) 

Updated annually, containing about 225 unique data points for approximately 3000 companies

Selected Executive Compensation Databases

Capital IQ

How to access: You may apply for a Capital IQ account (the vendor only allows accounts to be processed once a week on Wednesdays) or use the public machines in the RAIL Lab (B312) or two computers in the Trader’s Pit of the library (ground floor of Bass). See database entry.

Search for a specific company and CEO compensation  Video Tutorial

  1. Once on landing page type company name
  2. Search left hand navigation for People>Compensation
  3. To display more years, pull date bar to the left
  4. Click excel icon at top left to download your result

Execucomp (WRDS)

Use this database to build a list of executives by company to see their total compensation. Video Tutorial

Go to business A-Z, click on C and choose Compustat: Execucomp (via WRDS)

  1. From landing page click on Compustat-Capital IQ
  2. Click on Execucomp-Monthly updates
  3. Click on Annual Compensation
  4. Choose date 2016
  5. Select entire database to search
  6. Go to step 3-Query variables and choose company information and choose at least company name
  7. Go to Executive Information tab and select EXEC_FULLNAME and Annual CEO flag
  8. Go Compensation data and select TOTAL_SEC-Total compensation as reported in SEC filing
  9. (Very important) Go to Conditional statement and Select Annual CEO flag from pulldown and =CEO
  10. Go to Step 4 and choose output. Choose excel spreadsheet and submit
  11. When search is complete, click on link and view.

See example of completed search:

Completed Search in Execucomp

Step 2: Getting stock returns and/or financial statement data for your selected firms

CRSP(WRDS)

Content: Contains historical stock return data for the major US exchanges.

Uploading tickers: Read the document at the start of the CRSP video to learn how to prepare a file to upload multiple tickers to a WRDS CRSP search

Video Tutorial

Access CRSP

  1. Have text file of tickers ready
  2. Select CRSP
  3. Select Stock / Security Files
  4. Select Monthly Stock File
  5. Select Date Range, as appropriate
  6. Go to Browse and upload saved ticker text file
  7. Select display items, e.g. company name, ticker, holding period return
  8. Generate output, e.g. CSV (comma delimited)

Return data in CRSP: “Holding Period Return” represents the return over the period (either daily or monthly are available) and includes dividends. It’s expressed as a percentage. So .012 would be a 1.2% gain and -.027 would be a 2.7% loss over the period.

Compustat (WRDS)

Compustat in WRDS contains detailed financial data on North American and foreign companies.

See instructions for how to download financial statement data from Compustat.