Cherry picking, disclosure quality, and comprehensive income reporting choices: The case of property-liability insurers

• 成果类型: Article; Proceedings Paper
• 署名作者: Lee, Yen-Jung; Petroni, Kathy R.; Shen, Min
• 署名单位: University System of Georgia; Georgia State University; Michigan State University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1506/5QB8-PBQY-Y86L-DRYL
• 发表日期: 2006
• 页码: 655-692
• 关键词: commercial-banks; valuation; liquidity; earnings; cost; RISK

摘要

Statement of Financial Accounting Standards No. 130: Reporting Comprehensive Income encourages enterprises to report comprehensive income on a performance statement rather than on a statement of equity. We investigate the reporting decisions of 82 publicly traded property-liability insurers that are fairly evenly split in their choice. Our results demonstrate that insurers with a tendency to manage earnings through realized securities' gains and losses (that is, cherry pickers), as well as insurers with a reputation for poor disclosure quality, are more likely to report comprehensive income in a statement of equity. Apparently, these insurers face the highest cost of transparency. We do not find a relation between the reporting decision and the volatility of comprehensive income relative to the volatility of net income. Our findings that insurers' comprehensive income reporting choices are a reflection of their proclivity toward cherry picking as well as their level of disclosure quality should be of interest to standard-setters because of the controversy over standard-setters' preference for mandating all firms to report comprehensive income in a performance statement.