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Abstract:
Financial Accounting Standard 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, which are fairly evenly split in their choice. We find that insurers with a tendency to manage earnings through realized securities' gains and losses (i.e., cherry pickers), as well as insurers with a reputation for poor financial reporting quality, are more likely to bury comprehensive income in a statement of equity. Apparently, these insurers face the highest cost of transparency. Our findings that insurers' comprehensive income reporting choices are a reflection of their proclivity toward cherry picking as well as their level of financial reporting 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.

Abstract:
In this paper we investigate whether auditors' decisions can be explained by accruals quality. Using alternative measures of accruals quality developed by prior researchers, we find that a firm with poorer accruals quality is associated with higher audit fees, a greater likelihood of receiving a going concern audit opinion and a greater likelihood of auditor turnover. Recent studies have used accruals quality to proxy for a firm's information risk. Our study contributes to the literature by showing that information risk can be useful in explaining auditors' decisions. Accruals quality measures have also been suggested as a means of identifying earnings management. Existing studies exploring the effects of earnings management on auditors' decisions primarily use discretionary accruals and provide conflicting results. In contrast we find fairly consistent evidence that the likelihood of earnings management affects auditors' decisions adversely.

Accruals quality, Audit fees, Going concern, Auditor change

Abstract:
This study examines the interdependence between institutional ownership and the speed with which Standard & Poor’s disseminates corporate accounting information. From the demand-side perspective, we find that quasi-indexers, who rely on corporate accounting information as a low-cost monitoring system, are the key driver of the institutional demand for speedy information dissemination. In addition, dissemination speed increases substantially for stocks listed in major market indices but decreases with high arbitrage risk or transaction costs. From the consequences perspective, we find that both transient investors and quasi-indexers gravitate to stocks with faster information dissemination, consistent with the latter using accounting information as a low-cost performance monitoring mechanism, and the former being better enabled to implement their trading strategies in a richer information environment. Overall, this study provides new insights into the capital market information infrastructure by examining how information intermediaries and sophisticated investors impact each others’ resource allocation decisions.

institutional investors, data aggregators, information dissemination, capital markets

Abstract:
We provide new evidence on the disclosure in earnings announcements of financial statement line items prepared under Generally Accepted Accounting Principles (GAAP). First, we investigate the circumstances that might provide disincentives generally for GAAP line item disclosures. We find that managers who regularly intervene in the earnings reporting process limit disclosures at the aggregate level and in each of the financial statements so as to more effectively guide investor attention to summary financial information. Specifically, this disclosure behavior obtains when managers habitually cater to market expectations, engage in income smoothing, or use discretionary accruals to improve earnings informativeness. Second, we predict and find that the specific GAAP line items that firms choose to disclose are determined by the differential informational demands of their economic environment, consistent with incentives to facilitate investor valuation. However, these valuation-related disclosure incentives are muted when managers habitually intervene in the earnings reporting process.

disclosure incentives, financial statement information, valuation, earnings announcement

Abstract:
Financial Accounting Standard 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, which are fairly evenly split in their choice. Our results demonstrate that insurers with a tendency to manage earnings through realized securities' gains and losses (i.e., 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.

comprehensive income, accounting choice, property-liability insurers, earnings management