Part d is independent of part c. Given your understanding of…

Part d is independent of part c. Given your understanding of how investors determine the price of a company’s stock, how might investors respond to earnings that are “aggressively” managed? Be sure to define what you mean by “aggressively managed.”  Note:I do not want a specific example of how earnings are managed. Think about some of the characteristics that increase/decrease earnings quality. The Earnings Management Continuum (Stice and Stice, page 91 of the coursepack) may be helpful. Be sure to provide a complete discussion to earn full points.   

Another academic study used a unique dataset that identified…

Another academic study used a unique dataset that identified whether former clients of Arthur Andersen followed their former audit team to a new auditor. For example, client ABC followed the audit team that led its audits at Andersen, to their new auditor PwC, while client XYZ chose to cut all ties with their former audit team from Andersen when it hired EY (the former audit team was hired at PwC). Discuss how and why investors might respond to the actions of the two companies (ABC and XYZ) described above.