This paper examines the impact of dividend distribution decrease announcements on the security prices of master limited partnerships. (MLPs). These firms, whose earnings are not subject to U.S. Federal Income Tax, are marketed stressing high dividend yields. Since most MLPs are natural resource firms with only one line of business, cuts in dividend policy by one firm caused by industry‐wide factors might impact the market's pricing of similar firms. Therefore, tests of announcement effects are performed not only on the firm itself but also on a portfolio of related firms. Although the announcements were found to be associated with significant unit price reactions for the MLP making the announcement, the price reaction for similar firms was small, indicating only weak support for intraindustry information transfers. Résumé. L'auteur examine l'incidence des avis de réduction des déclarations de dividendes sur le prix des titres des Master Limited Partnerships (MLP). Pour mettre en marché les titres de ces entreprises, dont les bénéfices ne sont pas assujeuis à l'impôt fédéral américain sur le revenu, on fait valoir leur taux de rendement élevé. Comme la plupart des MLP œuvrent dans un secteur d'activité unique, celui des ressources naturelles, les réductions de dividendes opérées par une entreprise en raison de facteurs qui touchent l'ensemble du secteur risquent d'avoir une incidence sur le cours des titres d'entreprises similaires. C'est pourquoi l'auteur vérifie l'incidence de ces réductions non seulement sur les titres de l'entreprise qui les annonce, mais aussi sur un portefeuille de titres d'entreprises apparentées. Bien que l'annonce d'une réduction provoque d'importants changements dans le cours unitaire des titres de la MLP qui en est l'auteur, les changements enregistrés dans le cours des titres des entreprises similaires sont minces, ce qui indique un faible dispositif de transfert d'information à l'intérieur du secteur.

This study examines the unit (stock) price and volume behavior of master limited partnerships (MLP) around the ex-dividend day. Since the dividends of MLPs are not taxable to the unitholder, tax based hypotheses predict no abnormal unit movements around the ex-day. Significant positive excess returns and volume are found before the ex-dividend day, and significant negative excess returns are found on the ex-dividend day. The findings which are not significantly impacted by the Tax Reform Act of 1986 suggest ex-day stock movements are not solely a function of investor marginal tax rates or corporate trading behavior.

ABSTRACT This study examines the unit (stock) price and volume behavior of master limited partnerships (MLP) around the ex‐dividend day. Since the dividends of MLPs are not taxable to the unitholder, tax based hypotheses predict no abnormal unit movements around the ex‐day. Significant positive excess returns and volume are found before the ex‐dividend day, and significant negative excess returns are found on the ex‐dividend day. The findings which are not significantly impacted by the Tax Reform Act of 1986 suggest ex‐day stock movements are not solely a function of investor marginal tax rates or corporate trading behavior.

This study examines the unit (stock) price and volume behavior of master limited partnerships around the ex-dividend day. Since the dividends of master limited partnerships are not taxable to the unitholder, tax-based hypotheses predict no abnormal unit movements around the ex-day. Significant positive excess returns and volume are found before the ex-dividend day, and significant negative excess returns are found on the ex-dividend day. The findings, which are not significantly impacted by the Tax Reform Act of 1986, suggest ex-day stock movements are not solely a function of investor marginal tax rates or corporate trading behavior.

Prior studies have examined whether audit opinions have incremental explanatory power over financial statement data in predicting bankruptcy filings. However, recent regulatory pronouncements indicate that the auditor should attempt to predict impending financial distress (going‐concern difficulties), not whether a firm will file for bankruptcy. This study compares the audit opinion to the resolution of a bankruptcy filing to determine whether prior claims of audit failures might be due to the auditor's focus on financial distress resolution rather than the act of filing for bankruptcy. We find that the audit opinion is a significant variable in a model explaining the resolution of a bankruptcy filing. However, the audit opinion did not predict resolution of bankruptcy proceedings with any greater accuracy than did a naive mechanical model. Résumé. Des chercheurs se sont déjà demandé si l'opinion des vérificateurs avait un pouvoir explicatif marginal par rapport aux données des états financiers dans la prédiction des dépôts de bilan. Or, les règlements récemment promulgués prévoient que les vérificateurs doivent tenter de prédire les difficultés financières imminentes (menaces à la permanence de l'entreprise), et non pas les dépôts de bilan. Les auteurs mettent en parallèle l'opinion du vérificateur et l'issue des dépôts de bilan afin de déterminer si les allégations formulées d'inaptitude des vérificateurs peuvent être attribuables à l'intérêt porté par le vérificateur à la résolution des difficultés financières de l'entreprise plutôt qu'à l'acte du dépôt de bilan. Les auteurs concluent que l'opinion du vérificateur est une variable importante dans un modèle explicatif de l'issue des dépôts de bilan, maís qu'elle ne permet pas de prédire l'issue du déroulement de la faillite avec davantage d'exactitude qu'un modèle mécanique simple.

[In this article, we examine the information content of announcements of increased reserves for loan loss by Citicorp and other banks, and the later write-off announcement made by the Bank of Boston. During 1987, most major U.S. banks, led by Citicorp on 19 May 1987, announced large increases in their loan loss reserves because of problem loans in lesser developed countries (LDC). With substantial flexibility in accounting rules for determining loss exposure, the banks announced varying levels of reserve increases. On 14 December 1987, the Bank of Boston began a second round of activity relating to LDC debt by announcing a $200 million write-off of LDC loans and further increase in loan loss reserves. Financial reporters suggested that these events could be interpreted differently. Because Citicorp was a leading money-center bank, its announcement could be interpreted favorably as a signal of willingness to deal with the LDC debt problem. This interpretation could similarly apply to other banks, especially the more exposed money-center banks. In comparison, the Bank of Boston announcement was portrayed in the press as detrimental to the money-center banks for two reasons. First, unlike a reserve increase, a write-off reduces a bank's capital adequacy ratio. Capital adequacy ratios are used by bank regulators in determining the need for, and the level of, supervisory intervention. Second, the write-off was construed as an effort by regional banks to exploit their relatively limited exposure to LDC loans as a competitive advantage in the domestic banking market. We find evidence consistent with the expectations of the financial press. The strongest stock-price increases associated with both the Citicorp announcement and the subsequent announcements of reserve increases by other banks were found for the banks with the greatest exposure to LDC debt. In contrast, those banks with the greatest exposure to LDC debt and with the largest reserves sustained the largest stock-price decreases at the Bank of Boston write-off announcement. The larger money-center banks sustained, on average, a three-day decline in value of 5 percent around the Bank of Boston announcement date.]