Research Lab

This study investigates the timing and method of adoption of Statement of Financial Accounting Standards(SFAS) No. 106: Employers' Accounting for Post-Retirement Benefits Other Than Pensions (FASB [1990]). Our study is motivated by the Financial Accounting Standard Board's (FASB) policy of extending the adoption period of new accounting standards beyond one fiscal year. Specifically, during 1991 and 1992, firms could adopt SFAS No. 106, disclose the expected impact of adoption, or delay adoption/disclosure until fiscal 1993.

The article develops a theoretical framework that explains firms' reactions to accounting standards developed by the U.S. Financial Accounting Standards Board under its extended adoption policy. The proposed theory highlights the differences between recognized and disclosed accounting information and provides a link between a firm's choice of whether to recognize or disclose information under new accounting standards, and stock price behavior around the adoption announcement.

The paper demonstrates empirically that GAAP earnings have properties to serve as a substitute for dividends in equity valuation analysis. Dividends reduce subsequent GAAP earnings, and "intrinsic" equity prices calculated by forecasting earnings are thus reduced by current dividends. This is in accordance with the Miller and Modigliani principle—the displacement property—which states that the payment of dividends reduces prices, dollar for dollar.

This article suggests that the introduction of bank branching restrictions and federal deposit insurance in the United States likely was motivated by political considerations. Specifically, we argue that these restrictions were instituted for the benefit of the small unit banks that were unable to compete effectively with large, multiunit banks. We analyze this "political hypothesis" in two steps.

When the surge of equity REIT initial public offerings (IPOs) came to market in 1993 and 1994, the quality as well as an obvious increase in the quantity of newly securitized real estate (approximately $15.1 billion in the first two years of this bull market), defined a new REIT marketplace. By the end of 1995, the implied market capitalization of equity REITs had reached $59 billion, fourfold its size in 1992, and these real estate companies controlled approximately $83 billion in real estate.

In this paper, we critically examine the recommended practice of matching currency footprints. We argue that while matching currency footprints reduces profit variability, this practice can also cause reductions in expected profitability, a point that appears to have been overlooked in current literature. The expected profit effects of matching depend on the trade-off between possible expected cost savings of sourcing abroad verses the loss of what we refer to as "strategic flexibility" in responding to competitors' pricing and quantity decisions.

A study was conducted to interpret the price-earnings ratio (P/E) and the market-to-book ratio (P/B) and describe their articulation. It also aimed to explain the role of book rate-of-return on equity in determining the ratios and the relation between them. The P/E ratio signifies future growth in earnings positively related to expected future return on equity and negatively related to current return on equity. On the other hand, the P/B ratio indicates only expected future return on equity.