[This study examines empirically whether unfunded vested pension obligations that are not recorded in corporate balance sheets are viewed as a form of debt by the capital market participants when assessing firm risk. This is accomplished by using a model developed by Hamada [1972] which relates the systematic risk of a firm to its financial risk and business risk. The explanatory power of the model is improved when unfunded vested pension liabilities are included in the measurement of financial leverage. Furthermore, the effect of unfunded vested pension liabilities on market-perceived risk of the firm is not significantly (statistically) different from that of debt and other liabilities.]

This study examines empirically whether unfunded vested pension obligations that are not recorded in corporate balance sheets are viewed as a form of debt by the capital market participants when assessing firm risk. This is accomplished by using a model developed by Hamada [1972] which relates the systematic risk of a firm to its financial risk and business risk. The explanatory power of the model is improved when unfunded vested pension liabilities are included in the measurement of financial leverage. Furthermore, the effect of unfunded vested pension liabilities on market-perceived risk of the firm is not significantly (statistically) different from that of debt and other liabilities.

This paper examines the effect of the firm's capital structure on management's preference for alternative accounting standards. It is argued that an accounting standard which causes a reduction in reported earnings or equity and/or increases the volatility of reported earnings may put a firm into technical default on its loan agreements. Accordingly, it is hypothesized that highly leveraged firms would not favor such accounting standards. To test this hypothesis, the financial leverage of a sample of oil and gas producing firms which employ the full cost method of accounting for exploration expenses is compared with that of a sample of similar firms which use the successful efforts method. The results of this test are consistent with the hypothesized effect of the firm's capital structure on management's choice of accounting methods in that more highly leveraged firms tend to select the full cost method.

[The objective of this study is to examine the effect of the default risk of debt on the relation between accounting earnings and stock returns. Recent research suggests that measurements of equity beta do not capture all dimensions of riskiness of equity. The default risk of debt may help explain how accounting earnings are linked to stock returns because the default risk of debt may capture some elements of riskiness of equity that are not captured by equity beta. We document empirically that the coefficient relating unexpected changes in earnings to abnormal stock returns (the earnings response coefficient or ERC) is negatively related to the default risk of debt as measured by bond ratings.]

Examines the effect of the default risk of debt on the relation between accounting earnings and stock returns. Correlation between equity valuation and the earnings response coefficient (ERC); Cumulative abnormal returns; Equity beta; Earnings persistence; Unexpected earnings.

[The perceived limitations of historical cost net income for assessing the relative performance of oil and gas firms led the SEC and FASB to issue a series of pronouncements requiring disclosure of current value reserve-based information to supplement the information contained in the primary financial statements. This study examines whether historical cost earnings of oil and gas companies possess information in the sense of explaining cross-sectional differences in firm security returns. Additionally, we examine whether various Reserve Recognition Accounting-based measures possess incremental information relative to historical cost earnings measurements. The results indicate that for the sample period 1979-1981, historical cost earnings as well as reserve-based measures constructed from RRA data contain information relevant to valuing oil and gas firms. However, these results deteriorate for the sample period 1982-1984 where reserve-based measures are constructed from SFAS No. 69 data. The weaker relations in the latter period are consistent with the findings of Miller and Upton [1985b] and Magliolo [1986] and are attributed to the relative stability of oil prices during this time frame which results in a lower "signal-to-noise" ratio for the various reserve-based measurements.]

In this study, we examine some of the consequences of asset securitization. Specifically, using a sample of bank holding companies, we investigate whether the difficulty in assessing the true extent of risk transfer, between securitizing banks and investors in asset-backed securities, affects bank information uncertainty. We find that when market participants have a greater difficulty in estimating risk transfer, banks face greater information uncertainty (i.e., larger bid-ask spreads and analyst forecast dispersion). In addition, we find that this effect is mitigated for banks that operate in a higher quality information environment. We also find that banks that securitize financial assets have higher spreads and analyst forecast dispersion as compared to non-securitizing banks.

The perceived limitations of historical cost net income for assessing the relative performance of oil and gas firms led the SEC and FASB to issue a series of pronouncements requiring disclosure of current value reserve-based information to supplement the information contained in the primary financial statements. This study examines whether historical cost earnings of oil and gas companies possess information in the sense of explaining cross-sectional differences in firm security returns. Additionally, we examine whether various Reserve Recognition Accounting-based measures possess incremental information relative to historical cost earnings measurements. The results indicate that for the sample period 1979-1981, historical cost earnings as well as reserve-based measures constructed from RRA data contain information relevant to valuing oil and gas firms. However, these results deteriorate for the sample period 1982-1984 where reserve-based measures are constructed from SFAS No. 69 data. The weaker relations in the latter period are consistent with the findings of Miller and Upton [1985b] and Magliolo [1986] and are attributed to the relative stability of oil prices during this time frame which results in a lower "signal-to-noise" ratio for the various reserve-based measurements.

We examine the relationship between disclosure of nonfinancial information and analyst forecast accuracy using firm-level data from 31 countries. We use the issuance of stand-alone corporate social responsibility (CSR) reports to proxy for disclosure of nonfinancial information. We find that the issuance of stand-alone CSR reports is associated with lower analyst forecast error. This relationship is stronger in countries that are more stakeholder-oriented—i.e., in countries where CSR performance is more likely to affect firm financial performance. The relationship is also stronger for firms and countries with more opaque financial disclosure, suggesting that issuance of stand-alone CSR reports plays a role complementary to financial disclosure. These results hold after we control for various factors related to firm financial transparency and other potentially confounding institutional factors. Collectively, our findings have important implications for academics and practitioners in understanding the function of CSR disclosure in financial markets. Data Availability: The data are publicly available from the sources identified in the paper.