[Since the late 1970s, oil and gas firms have been required to include (unaudited) estimates of proved reserve quantities and valuations based on these estimates in their financial statements. As defined by the SEC, proved reserves are those that will be produced with "reasonable certainty" under existing economic conditions. In addition, firms must disclose estimated quantities of proved developed reserves, which will be produced from existing wells. At the time the proved reserve determination is made, substantial uncertainty exists as to the amount of oil ultimately recoverable, suggesting that the reserve estimation process is unreliable (Magliolo 1986b). Although certain constituencies have indicated interest in having firms disclose reserve quantities (see, e.g., Deakin and Deitrick 1982), the relevance of the disclosures for any given firm is an open question. It is to this issue that our research is directed. Prior research has demonstrated a weak association between security prices and oil and gas valuation disclosures required by SFAS No. 69 (see, e.g., Harris and Ohlson 1987; Magliolo 1986a). At least two explanations could account for the weak association: (1) reserve quantity estimates underlying the valuation disclosures are unreliable, and (2) the valuation model used to attach value to reserve quantities is flawed. Although the valuation approach used in these "reserve recognition accounting" disclosures has been widely disparaged, much criticism also concerns problems in the estimation of oil and gas reserve quantities. This article narrows the focus of prior research and specifically examines the value-relevance of reserve quantity disclosures required by SFAS No. 69 (FASB 1982). This more narrow focus permits us to investigate, for the first time, one of the explanations for why the reserve valuation components do not appear to be particularly informative. It also allows us to compare the informativeness of management claims about reserve quantities in the SFAS No. 69 disclosures with quantity estimates that we infer from management actions (i.e., production of oil). The article explores two empirical questions concerning reserve quantity disclosures. First, we examine the required SFAS No. 69 disclosures for proved reserves and proved developed reserves and ask whether these reserve estimates are value-relevant, given a benchmark estimate of reserves based on firms' current oil production levels. The second question is whether the association between market valuation and firms' reserve disclosures differs across firms according to characteristics of the disclosed data. Specifically, we determine whether investors' reliance upon SFAS No. 69 reserve quantity disclosures is related to variation in the reliability of such disclosures across firms, as indicated by the absolute size and direction of reserve estimate revisions, as well as the ratio of proved developed to total proved reserves. Each of these factors potentially provides information on the reliability or usefulness of reserve disclosures. In our first tests, which do not allow for firm-specific variation in the informativeness of SFAS No. 69 quantity disclosures, we find no evidence that disclosures based on proved reserves and proved developed reserves provide additional value-relevant information to market participants once production is known. However, when we partition our sample, we find that the proved reserve information is informative for a subset of firms whose reserve quantity estimates appear more reliable. The importance of our results extends beyond the oil and gas accounting area. The differential reliability results represent some of the first capital-markets-based evidence that the informativeness of a disclosure varies in accordance with the accuracy of management projections. Stated differently, our evidence suggests that investor reliance on disclosures varies as a function of their "quality." Also, our initial results that disclosures of proved reserve quantities provide no information once production is known suggest a reliance by investors on the "objective" information provided by management actions (production decisions) rather than the (potentially) subjective estimate of proved reserves.]

Executive compensation, R&D, Stock based measures

We document that tax considerations influence whether and when a firm withdraws excess assets in its defined benefit pension plan through a reversion. Since a reversion impacts taxable income over many years and alternative methods of withdrawing excess assets exist, we argue that the economically relevant tax-based decision criterion is its ‘differential tax benefit’, defined as the difference between the discounted tax savings of reversion versus those of the best alternative withdrawal method. We develop a technique for directly estimating this decision criterion and document that differential tax benefits are strongly correlated with the reversion decision and its timing.

This paper investigates the extent of intra-industry information transfers associated with the half-yearly earnings announcements of a sample of Australian firms. The ‘omitted factor’ interpretation of Foster's (1981) results is examined using a recursive systems specification of the return generating process to model extra-market return covariation in cross-section. Although some aspects of the results do appear sensitive to the alternative methodologies, the overall conclusion is consistent with Foster (1981) and supports the existence of intra-industry information transfers associated with firms' earnings releases.

Abstract Focuses on issues concerning reserve disclosures. Weak associations between security prices and gas valuation disclosures; Value-relevance of reserve estimates; Variation in the informativeness of quantity disclosures.

Abstract. We synthesize and extend research exploring differences between U.S. and other countries' Generally Accepted Accounting Principles (GAAP) by investigating whether differences between domestic and U.S. GAAP for U.S.‐listed U.K., Australian, and Canadian firms are associated with firms' returns and prices. The accounting differences we investigate include goodwill, asset revaluations, income taxes, pensions, interest capitalization, foreign currency, and extractive industries accounting. We conclude that goodwill is priced as an asset; that asset revaluations, successful efforts accounting for extractive industries, and immediate recognition of foreign currency exchange gains and losses on long‐term assets and liabilities are generally uncorrected with the information that investors consider relevant; that U.K., U.S., and Australian tax accounting methods do not recognize ‘enough’ tax expense or liability; and that accrual pension accounting and, in some specifications, interest capitalization add explanatory power beyond Australia's cash‐based method. Our findings suggest that the U.S. Securities and Exchange Commission's (SEC's) required GAAP reconciliation reflects information useful to investors for U.K. and Australian firms, and to a more limited extent, for Canadian firms. Résumé. Les auteurs font la synthèse des travaux actuels portant sur l'analyse des différences entre les PCGR des États‐Unis et ceux des autres pays; ils poussent plus loin les recherches en s'interrogeant sur la relation possible entre les différences des PCGR de divers pays par rapport à ceux des États‐Unis, d'une part, et le rendement et le cours des actions d'entreprises du Royaume‐Uni, de l'Australie et du Canada, inscrites en bourse aux États‐Unis. Les différences comptables qu'ils étudient ont trait, entre autres, à l'achalandage, aux réévaluations de l'actif, aux impôts sur le bénéfice, aux régimes de retraite, à la capitalisation des intérêts, aux devises et aux méthodes comptables de l'industrie minière. Les auteurs concluent que l'on traite l'achalandage à titre d'élément d'actif; les réévaluations de l'actif, la capitalisation du coût de la recherche fructueuse dans l'industrie minière et la constatation immédiate des gains et pertes de change sur les éléments d'actif et de passif à long terme ne présentent généralement aucune corrélation avec l'information que les investisseurs jugent pertinente; les charges fiscales ou les impôts à payer que permettent de constater les méthodes comptables appliquées aux fins fiscales au Royaume‐Uni, aux États‐Unis et en Australie ne sont pas «suffisantes»; la comptabilisation de la charge de retraite sur la base des prestations constituées a un pouvoir explicatif supérieur à celui de la méthode basée sur la comptabilité de caisse en vigueur en Australie et, à certains égards, c'est aussi le cas de la capitalisation des intérêts. Les constatations des auteurs laissent croire que le rapprochement des PCGR exigé par la SEC livre de l'information utile aux investisseurs en ce qui a trait aux entreprises du Royaume‐Uni, de l'Australie et, dans une moindre mesure, du Canada.

Mary E. Barth, Greg Clinch, Revalued Financial, Tangible, and Intangible Assets: Associations with Share Prices and Non-Market-Based Value Estimates, Journal of Accounting Research, Vol. 36, Studies on Enhancing the Financial Reporting Model (1998), pp. 199-233

We show harmonizing domestic GAAP with foreign GAAP can have deleterious effects on security market performance, specifically price informativeness and trading volume. Harmonization effects result from interaction between two forces. Direct informational effects depend on whether harmonization increases or decreases GAAP precision. Expertise acquisition effects depend on benefits and costs to foreign investors of becoming domestic GAAP experts. These countervailing forces can result in harmonization to more (less) precise GAAP increasing (decreasing) or, unexpectedly, decreasing (increasing) price informativeness and trading volume. We also observe this for a cost of capital metric. Thus, harmonization is not necessarily a desirable singular goal.

ABSTRACT Short sellers assist in impounding negative news more quickly into stock prices and improve price informativeness. However, there is a lack of consistent evidence about whether short sellers trade predominantly in anticipation of, or in response to, a public information release. To shed light on this question, we exploit Reg SHO, which reduced the constraints faced by short sellers for a subsample of U.S. firms, to examine price informativeness before, during, and after earnings announcements. We show that relative to control firms, pilot firms have greater (less) price informativeness before (during) earnings announcements, suggesting that short sellers trade in anticipation of public earnings news, rather than in response to the public news. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M40; M41; M48.