Knowledge that Transforms

[Using a sample of publicly traded savings and loan associations (S&Ls), this paper provides evidence that off-balance-sheet derivatives activities are positively associated with lower stock-price interest rate sensitivity. Similar to the results for derivatives, on-balance-sheet exposures to interest rate changes, as measured by the maturity mismatch of institutions' assets and liabilities, are also value relevant. Currently, the measures of on-balance-sheet interest rate risk and the corresponding impact of derivatives used in this study are not required annual report disclosures. Rather, these data are obtained from regulatory filings. The reporting of the impact of derivatives on the corresponding measure of on-balance-sheet risk is analogous to the concept of "at-risk" disclosures for derivatives which have been encouraged by the FASB and SEC. Therefore, the results suggest that the proposed disclosures will provide value-relevant information about interest rate risk for S&Ls.]

[Pownall et al. (1993) document that nearly 80 percent of their sample of voluntary management earnings forecasts are not precise point forecasts. Imprecise forecast forms include closed-interval forecasts (i.e., ranges), open-interval forecasts (i.e., minimums and maximums), and general impressions about firms' earnings prospects. We perform cross-sectional logistic regressions to document determinants of forecast precision. Our sample consists of 1,212 annual and interim management forecasts. After controlling for firm-specific and horizon-specific earnings uncertainty, we find that managers produce more precise forecasts of annual earnings for firms with greater analyst following (our proxy for private information) and for smaller firms (our proxy for public information). The results are robust across subsamples. The majority of the results, however, do not hold for interim forecasts.]