Journal article
The economic determinants of the market reaction to proposed mandatory accounting changes in the oil and gas industry. A cross-sectional analysis
Journal of accounting & economics, Vol.3(1), pp.37-71
03/01/1981
DOI: 10.1016/0165-4101(81)90034-3
Abstract
This paper examines the economic reasons for the observed negative abnormal common stock performance of firms whose reported earnings and stockholders' equity were negatively affected by the proposed elimination of full cost accounting in the oil and gas industry. Four explanations of the market effects of this mandatory accounting change are examined: (1) naive investor theory, (2) modified naive investor theory, (3) contracting cost theory, and (4) estimation risk theory. These hypotheses are developed in detail and used to generate variables for a cross-sectional model which explains observed return behavior. The effect of the accounting change on total stockholder's equity, the existence of financial contracts denominated in terms of accounting numbers and, to a lesser extent, firm size are shown to be important explanatory variables. The importance of these variables is consistent with both the contracting cost and estimation risk theories. © 1981.
Details
- Title: Subtitle
- The economic determinants of the market reaction to proposed mandatory accounting changes in the oil and gas industry. A cross-sectional analysis
- Creators
- Daniel W. Collins - University of IowaMichael S. Rozeff - University of IowaDan S Dhaliwal - University of Arizona
- Resource Type
- Journal article
- Publication Details
- Journal of accounting & economics, Vol.3(1), pp.37-71
- DOI
- 10.1016/0165-4101(81)90034-3
- ISSN
- 0165-4101
- eISSN
- 1879-1980
- Number of pages
- 35
- Language
- English
- Date published
- 03/01/1981
- Academic Unit
- Accounting
- Record Identifier
- 9984962553102771
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