This paper addresses whether events leading to three regulatory accounting principles issued by the Federal Home Loan Bank Board affected the market value of Savings and Loan Associations (S&Ls). The market reaction to these regulations is predicted to be positive since they effectively eased minimum regulatory net worth requirements. A significant market reaction is observed for the regulation that allowed S&Ls to increase regulatory net worth by permitting appraised equity capital. However, results are inconsistent with the alternative hypothesis associated with the regulations permitting deferral of loan losses and net worth certificates.

We show that firms with executive bonuses that qualify for deduction under Internal Revenue Code Section 162(m) were less likely to expense stock option compensation (SOC) in 2002. Additionally, the more likely it is that a qualified firm will incur re-contracting costs, the less likely it is that the firm will expense SOC. CEOs of qualified firms that also expense SOC receive smaller bonuses than CEOs of expensing firms that are not qualified under 162(m), and the lower 162(m) bonuses are not offset by higher SOC. Our results suggest that 162(m) tax incentives are an important determinant of the decision to expense SOC.

Union Carbide's chemical leak in Bhopal, India during December 1984 resulted in approximately 4,000 deaths and 200,000 injuries. This study examines the market reaction of chemical firms other than Union Carbide to this catastrophe. Evidence indicates that a significant negative intra-industry reaction occurred. However, firms with more extensive environmental disclosures in their financial report prior to the chemical leak experienced a less negative reaction than firms with less extensive disclosures. This result suggests that investors interpreted such disclosures as a positive sign of the firm managing its exposure to future regulatory costs.

One consequence of the shift to fair value measurement is the emergence of voluntary disclosures in audited financial statements that question the reliability of mandated fair value information. We refer to these disclosures as reliability disavowals. We examine stock option volatility estimates disclosed under SFAS 123 and test whether disavowals are informative (opportunistic) by examining whether ex ante firm characteristics, forecast bias, and prediction difficulty are consistent with informative (opportunistic) disclosure. Our results support the hypothesis that disavowals inform users about the reliability of volatility estimates, but there is also limited evidence consistent with managers using disavowals opportunistically.

This study examines the effect of ongoing deregulation in the electric utility industry on the relation between market value, book value, and earnings. We predict that deregulation decreases (increases) the relative importance of book value (earnings) in explaining price. We test this prediction by examining changes in the value relevance of book value and earnings during the 1988–1996 time period for a sample of large, investor-owned electric utilities. We find that the regression coefficients and incremental explanatory power related to book value (earnings) have decreased (increased) over this time period. These results are generally robust in sensitivity analysis.

The voluntary use of regulatory accounting principles (RAP) by Savings and Loans (S&Ls) is predicted to be related to ownership structure, proximity to violation of net worth requirements, political factors, and prior use of RAP. We examine the decisions to both adopt and retain the use of several RAP: two ‘cosmetic’ RAP that are relatively independent of other economic decisions and two ‘noncosmetic’ RAP that directly interact with investment or financing decisions. S&Ls using RAP tend to: (a) be mutuals, (b) have low regulatory net worth, (c) be larger (for S&Ls adopting RAP), and (d) have used other RAP in the prior period.