This paper examines banks’ choice of accounting methods in a new regulatory environment that more closely ties regulatory monitoring to GAAP numbers. The study finds that banks’ choice of the implementation method for SFAS 106 is consistent with an attempt to balance the increased regulatory costs with earnings management benefits. Moreover, banks strategically chose the adoption timing of both SFAS 106 and SFAS 109 to further reduce regulatory costs. The implementation method choice is consistent with a portfolio approach where managers simultaneously consider the existing discretionary accrual levels vis-à-vis the financial reporting effects of impending accounting standards.

This paper posits that stock market response to two accounting performance measures - sales growth and capital investment - is a function of firm life cycle stage. Firms are grouped into various life cycle portfolios using dividend payout, sales growth, and age. As predicted, the empirical results indicate a monotonic decline in the response coefficients of unexpected sales growth and unexpected capital investment from the growth to the stagnant stages. Additional analysis suggests that this relation is not driven by a firm size effect, risk differences, or measurement error in the proxies for performance measures.

We investigate the determinants of discretionary SFAS 106 choices of non-regulated firms. We find that more unionized firms are more likely to use immediate recognition, consistent with incentives to reduce labor renegotiation costs. Immediate recognition is more prevalent among post-adoption plan modifiers, particularly if their transition obligation is large, consistent with incentives to increase future reported earnings. Immediate recognition, together with post-adoption benefit plan reduction, frees future income from the transition obligation amortization expense and adds a positive component as negative prior service costs are amortized. Immediate recognition is less prevalent among firms with higher potential debt contracting costs.

This paper examines the value relevance of fair value data disclosed under SFAS 107 by banks for 1992 and 1993. Collectively, the evidence suggests differences between fair and book values of financial instruments are associated with market-to-book ratios. However, fair value disclosures for financial instruments other than securities are value-relevant only in limited settings. In addition, only in 1992 are fair value variables associated with market-to-book ratios after incorporating existing historical cost information. Further analysis suggests the weaker 1993 results are not necessarily due to increased measurement error in fair value numbers.

This study examines whether a simple measure of internet search intensity for publicly traded retail firms can enhance the capital market's firm‐level revenue expectations and provide insights into economy‐wide retail sales. At the firm level, the search index is predictive of analyst nowcast and forecast errors after controlling for past sales, deferred revenue, firm characteristics, and firm and time fixed effects. An implementable trading strategy generates abnormal returns of roughly 2% to 3% from the fiscal quarter end through the earnings announcement, well above transaction costs. We also find that approximately two‐thirds of the abnormal returns occur around earnings announcements, with an even greater fraction for firms with coarser information environments. At the macro level, we find that the permanent, seasonal, and transitory components of our search intensity index align with those of the Census Bureau's retail sales data and US real gross domestic product, suggesting our measure is a leading indicator of personal consumption expenditures, a key driver of aggregate output. The aggregated search index nowcasts aggregated publicly traded retail firm sales both within and out‐of‐sample after controlling for past sales.

In this paper, we examine how the exclusion of voluntary and mandatory accounting changes from the calculation of covenant compliance affects the interest rate charged on the loan. After controlling for self-selection bias and other factors known to affect loan spreads, we find that the rate charged is 84 basis points lower when voluntary accounting changes are excluded and 71 basis points lower when mandatory accounting changes are excluded. Our results suggest that borrowers are willing to pay substantially higher interest rates to retain accounting flexibility that may help them avoid covenant violations and to avoid duplicate record-keeping costs.

The effect that voluntarily disclosed managers' earnings forecasts have on the security prices of the announcing firms and other firms in the same industry is examined. The results are consistent with information content in managers' forecasts and with information transfer between forecast firms and other firms in the industry. These inferences are drawn from firms' abnormal returns computed from single- and two-index pricing models - where the latter includes market and industry indexes. Interestingly, while a positive information transfer is evident with market model residuals, once industry cross-sectional covariation in firms' returns is removed, no directional relation is apparent.

Implementation of Public Company Accounting Oversight Board Auditing Standards No. 2 on internal control and No. 3 on documentation has delayed audit completion. However, due to market demand for timely disclosures, most firms maintain the same preliminary earnings release date even though the audit may not be complete as of that date. Results indicate revisions to preliminary announcements when filing the 10-K report would have been 35% lower during 2005 if the historical frequency of issuing earnings releases after the audit report date had not changed. Additionally, stock market reaction to impending revisions suggests lower reliability of preliminary earnings.

ABSTRACT: Using data from the EDGAR era, we find a significant market reaction surrounding quarterly periodic reports only when their filing coincides with the first public disclosure of earnings, although that for 10-K reports is not subsumed by earnings releases. However, after eliminating incidence of concurrent earnings releases, the 10-K market reaction is restricted to a quarter of the reports that are filed around calendar quarter-ends. The calendar quarter-end price and volume effects are unrelated to the filing of periodic reports and are not explained by self-selection. However, while the quarter-end volume reaction is indistinguishable between filers and non-filers, we find an incremental price reaction to 10-K filings at calendar quarter-ends in recent times. We provide evidence that the calendar-time effect is partially due to an intraindustry information transfer that is a function of the incidence of 10-K reports at quarter-ends. Finally, equity analyst reactions are muted around periodic filings, with no evidence that they contribute to quarter-end information transfer.