Abstract ABSTRACT: A contingent claims valuation model is used to estimate the values of a sample of convertible bonds and to partition those values into their debt and equity portions. The model and market values of the bonds are compared and model estimates are found to be approximately unbiased relative to market values, with about 90 percent of the values within ten percent Of market values. The average equity values of the convertible bonds are found to constitute 16.7 percent and 18.4 percent of the book and market values of the bonds, respectively. When leverage and dilution measures for the sample are restated by excluding the estimated equity value of convertibles from debt, differences are small on average, but for some firms they are substantial. A comparison of reported earnings per share (EPS) with EPS using model equity values reveals that model EPS differs cross-sectionally from both primary and fully diluted EPS but is much closer on average to primary EPS. The findings of the study provide reason for optimism regarding applications of contingent claims models to practical valuation problems, particularly with regard to more meaningful measures of dilution of earnings and leverage.

[This study tests whether there is a relationship between the lobbying activities of firms on a proposed accounting standard (FAS No. 19) and the trading activities of corporate insiders. We find that, on average, insiders of full cost firms that lobbied were net sellers and successful efforts lobbiers were net buyers, while non-lobbiers took opposite positions. The results are consistent with the hypothesis that lobbying activity is correlated with management's expected wealth. The results are also consistent with comment letters to the FASB having information value, since insiders trade on their personal account in the same direction their firms lobby. Alternatively, the results can be interpreted as support for the conclusion of Larcker, Reder and Simon [1983] that FAS No. 19 was perceived to have economic consequences.]

Abstract ABSTRACT: This study testa whether there is a relationship between the lobbying activities of firms on a proposed accounting standard (FAS No. 191 and the trading activities of corporate insiders. We find that, on average, insiders of full cost firms that lobbied were net sellers and successful efforts lobbiers were net buyers, while non-lobbiers took opposite positions. The results are consistent with the hypothesis that lobbying activity is correlated with management's expected wealth. The results are also consistent with comment letters to the FASB having information value, since insider, trade on their personal account in the same direction their firms lobby. Alternatively, the results can be interpreted as support for the conclusion of Larcker, Reder and Simon [1983] that FAS No. 19 was perceived to have economic consequences.