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Accounting Choices And The Legal Environment: The Impact Of The Ex Post Loss Rule, Teck Meng Junior Tan
Accounting Choices And The Legal Environment: The Impact Of The Ex Post Loss Rule, Teck Meng Junior Tan
Research Collection School Of Accountancy
Using a landmark Supreme Court decision as a natural experiment, I examine the impact of a fundamental requirement in securities litigation, the ex post loss rule, on income-decreasing accounting choices. Dura Pharmaceuticals v. Broudo (2005) established that plaintiffs must show that the alleged misrepresentations caused an actual economic loss. The case resolved a circuit split, allowing me to identify a treatment jurisdiction affected by Dura, and control jurisdictions in which the rule was already the prevailing legal standard. Motivated by legal analyses suggesting that Dura incentivizes firms to delay negative corrections, I hypothesize and find that treatment firms in high-litigation …
Are The Loan Loss And Fair Value Components Of Bank Income Rationally Priced?, Chu Yeong Lim, Edward Lee, Martin Walker
Are The Loan Loss And Fair Value Components Of Bank Income Rationally Priced?, Chu Yeong Lim, Edward Lee, Martin Walker
Research Collection School Of Accountancy
This paper examines if the market rationally prices the loan loss provisions, and the fair value gains and losses of US banks. We also model the discretionary components of loan loss provisions and fair value gains and losses, and test if the discretionary components are priced differently from their non-discretionary counterparts. We find little evidence that the market misprices operating cash flows, non-discretionary loan loss provisions, or fair value gains and losses (discretionary or otherwise). However we do find evidence of significant mispricing of discretionary loan loss provisions. This evidence remains significant even after controlling for the fact that loan …