The Accounting Review Vol. 66 No. 3 1991
Security Market Effects Associated With SFAS No. 94 Concerning Consolidation Policy.
Abstract
The article reports on the result of a study which examined the security market reaction to the issuance of SFAS No. 94 that required consolidation of finance subsidiaries in the United States. SFAS 94 (1987) requires consolidation of all majority-owned subsidiaries, including those of nonhomogeneous operations, large minority interests, or foreign locations. An effect of implementing the standard is that financial statements components other than net income and stockholders' equity will differ those that would have been reported as if the standard did not apply. The results indicate that the issuance of SFAS 94 was associated with significant negative excess stock returns. Of the hypotheses tested, this evidence is consistent with the prediction generated by the cash-flow effects hypothesis; but is inconsistent with the redistribution-effects hypothesis. In addition, no significant positive excess returns were obtained for nonconvertible debt securities of firms that did not consolidate prior to SEAS 94, which provides weak evidence of the dominance of the cash-flow effects of SEAS 94 over the redistribution effects.
- DOI
- 10.2308/tar-9605072960
- Volume
- 66
- Issue
- 3
- Pages
- 611-621
- Language
- en
- Sources
- openalex crossref