Do Investors Understand Really Dirty Surplus?

• 成果类型: Article
• 署名作者: Landsman, Wayne R.; Miller, Bruce L.; Peasnell, Ken; Yeh, Shu
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; University of California System; University of California Los Angeles; Lancaster University; National Taiwan University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.00000014
• 发表日期: 2011
• 页码: 237-258
• 关键词: EMPLOYEE STOCK-OPTIONS; PRICES FULLY REFLECT; FUTURE PROFITABILITY; empirical-assessment; income; earnings; valuation; returns; RISK

摘要

This study addresses whether firms' share prices correctly reflect two accounting measures: dirty surplus and really dirty surplus. Dirty surplus is readily observable from the financial statements, but really dirty surplus, which arises from recognizing equity transactions such as employee stock option exercises at other than fair market value, is not. Findings show that dirty surplus and really dirty surplus are irrelevant for forecasting abnormal comprehensive income. However, findings also indicate that investors appear to undervalue really dirty surplus. Hedge returns are insignificant when portfolios are formed based on dirty surplus, but are significantly positive based on really dirty surplus. Really dirty surplus positive hedge returns are robust to a variety of sensitivity tests. Taken together, the findings are consistent with either investors over-valuing firms that have large negative really dirty surplus or really dirty surplus being correlated with an unmodeled risk factor.