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Full-Text Articles in Accounting
Does The Relation Between Information Quality And Capital Structure Vary With Cross-Country Institutional Differences?, Jeff Zeyun Chen, Chee Yeow Lim, Gerald J. Lobo
Does The Relation Between Information Quality And Capital Structure Vary With Cross-Country Institutional Differences?, Jeff Zeyun Chen, Chee Yeow Lim, Gerald J. Lobo
Research Collection School Of Accountancy
Prior research based on U.S. data finds that firms with better information quality raise more equity whereas firms with poorer information quality prefer to issue debt when they seek external financing. Little is known about whether the same conclusion holds outside the U.S. and how the country-level institutional environment influences the relation between information quality and capital structure choices. We examine the relation between accounting information quality (measured by earnings precision, accruals quality, and analyst consensus) and financial leverage across 24 countries and whether that relation varies systematically with country-level investor protection and financial orientation. We document a lower financial …
Financing A Loss. Accounting And Finance Research, David Rakowski, Eahab Elsaid
Financing A Loss. Accounting And Finance Research, David Rakowski, Eahab Elsaid
Odette School of Business Publications
When companies have a net loss accompanied by negative operating cash flows, they must decide how to handle the financing deficit, or, stated differently, they must decide how to finance the loss. By examining a large sample of firms with net losses, we document how companies respond to the financing shock that occurs with negative cash flow. For companies with a one-year loss, current assets decrease and current liabilities increase. While we observe that leverage ratios increase during a loss year, this increase has more to do with decreasing book equity than an increase in long-term debt. However, when the …
Valuation And Classification Of Company Issued Cash And Share-Puts, William D. Terando, Wayne Shaw, David Smith
Valuation And Classification Of Company Issued Cash And Share-Puts, William D. Terando, Wayne Shaw, David Smith
Scholarship and Professional Work - Business
This paper examines whether investors’ valuations of cash and share-put warrants are influenced by their potential differential effect on firm solvency. It is motivated by the enactment of SFAS 150, which requires that all contingent put warrant obligations be classified as balance sheet liabilities regardless of put type. Consistent with the critics of SFAS150, we show that market participants differentially value cash and share-puts based on their solvency characteristics beyond the firm’s recorded assets and liabilities. Our results add to existing capital structure literature by suggesting that complex financial instruments (such as cash and share-puts) be reported separately from each …