This study examines UK firms' contracting cost incentives for capitalizing estimates of brand value. Results indicate that firms' decisions to capitalize acquired brands were influenced by the impact that the immediate write-off of goodwill to equity has on the London Stock Exchange's shareholder approval requirement for future acquisitions and disposals. These findings provide evidence of contracting costs that result from stock exchange mandated shareholder approval rules for planned transactions.

We investigate the market valuation of earnings and book value amounts prepared under IAS and US-GAAP to provide evidence for the debate between the US SEC and NYSE on whether foreign firms should be allowed to list in the US using IAS. We find that the US-GAAP earnings reconciliation adjustment is value-relevant and that US-GAAP amounts are valued differently for market value and return models, but not a price-per-share model. We also find that IAS amounts are more highly associated with price-per-share than US-GAAP amounts, and that US-GAAP amounts are more highly associated with security returns than IAS amounts.

Finance theory proposes that firms’ cost of capital increases when market makers set wider spreads due to perceived higher information asymmetry across traders. Using a sample of UK investment property firms and controlling for firms’ non‐random selection of external monitors, we find evidence that market makers perceive information asymmetry across traders to be lower for firms employing external appraisers versus those employing internal appraisers. This evidence is consistent with liquidity‐motivated traders being unable to overcome such reliability differences using asset value information from sources other than accounting. We fail to find a similar difference for firms employing Big 6 versus non‐Big 6 auditors. Our findings contribute to the debate over the recognition of fair value estimates for long‐lived tangible assets by documenting that reliability differences attributable to differential monitoring by appraisers can affect information asymmetry, and therefore firms’ cost of capital.

This study provides evidence that, when “hard” freezing their defined benefit pension plans, employers select downward biased accounting assumptions to exaggerate the economic burden of their benefit plans. Downward biased expected rates of return and discount rates allow managers to increase reported pension expenses and, for discount rates, allow managers to increase reported pension liabilities. We find that prior to the Sarbanes-Oxley Act, both rates are downward biased when firms freeze their plans, whereas after SOX the bias is lower. This finding is consistent with managers opportunistically biasing pension estimates to obtain labor concessions during periods of reduced regulatory scrutiny.

We provide evidence that CEO cash compensation is relatively less sensitive to pension expense than pension income, suggesting that compensation committees shield CEO cash compensation from pension expense amounts. We also provide evidence that managers use relatively higher expected rate of return estimates when reporting pension income, suggesting that managers select income-increasing accounting estimates in response to compensation committees’ greater emphasis on pension income in CEO cash compensation determinations. Pension cost amounts represent a unique setting to examine such behavior as their effect on CEO cash compensation can be detrimental or beneficial, but arise from the same underlying economic activity.

We investigate the reliability of mandatory annual fair value estimates for UK investment property. We find that appraisal estimates understate actual selling prices and are considerably less biased and more accurate measures of selling price than respective historical costs. Investigations of managerial discretion over fair value reporting reveal that managers select among permissible accounting methods to report higher earnings, time asset sales to smooth reported earnings changes, smooth reported net asset changes and boost fair values prior to raising new debt. Finally, we find that the reliability of appraisal estimates increases when monitored by external appraisers and Big 6 auditors.

We investigate whether increased investor demand for financial information arising from higher market uncertainty leads to greater media coverage of earnings announcements. We also investigate whether greater coverage during times of higher uncertainty further destabilizes financial markets because of greater attention-based trading or, alternatively, improves trading and pricing by lowering investor acquisition and interpretation costs. When uncertainty is higher, we find evidence of greater media coverage of earnings announcements and that the greater coverage leads to improvements in investor informedness, information asymmetry, and intraperiod price timeliness, and greater trade by both retail and institutional investors. In contrast to the media serving an expanded role in improving capital markets during more uncertain times, we fail to find that changes in firm-initiated disclosures lead to similar improvements and find that less frequent analyst forecast revisions exacerbate problems in capital markets during earnings announcements.

Concerns are commonly raised that strong public unions extract generous pension benefits from state governments and are the cause of states' burdensome pension obligations. Prior research (Anzia and Moe 2015) finds evidence supporting such concerns. Consistent with incentives to minimize such perceptions, our findings suggest that state pension plans with stronger public unions select higher discount rates to improve reported funding levels. While riskier asset allocations are used to support the higher discount rates (which equal the expected return on the plan assets), most of the higher rates appear opportunistic. In addition, consistent with a desire to avoid drawing attention to persistent plan underfunding, our evidence indicates that stronger union plans are less likely to select longer amortization periods to recognize pension deficits when underfunding is larger. We do not, however, find evidence for asset smoothing periods being used to delay the recognition of investment losses on plan assets. Together, our findings suggest that stronger union plans take steps to make their pension obligations look less burdensome to the public.