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Do investors understand really dirty surplus?

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Do investors understand really dirty surplus? / Landsman, W R; Miller, B L ; Peasnell, K V et al.
In: The Accounting Review, Vol. 86, No. 1, 2011, p. 237-258.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Landsman, WR, Miller, BL, Peasnell, KV & Yeh, S 2011, 'Do investors understand really dirty surplus?', The Accounting Review, vol. 86, no. 1, pp. 237-258. https://doi.org/10.2308/accr.00000014

APA

Landsman, W. R., Miller, B. L., Peasnell, K. V., & Yeh, S. (2011). Do investors understand really dirty surplus? The Accounting Review, 86(1), 237-258. https://doi.org/10.2308/accr.00000014

Vancouver

Landsman WR, Miller BL, Peasnell KV, Yeh S. Do investors understand really dirty surplus? The Accounting Review. 2011;86(1):237-258. doi: 10.2308/accr.00000014

Author

Landsman, W R ; Miller, B L ; Peasnell, K V et al. / Do investors understand really dirty surplus?. In: The Accounting Review. 2011 ; Vol. 86, No. 1. pp. 237-258.

Bibtex

@article{eb29a77d211c44cb96f8ee9685bdf0f8,
title = "Do investors understand really dirty surplus?",
abstract = "This study addresses whether firms{\textquoteright} 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.",
author = "Landsman, {W R} and Miller, {B L} and Peasnell, {K V} and S Yeh",
year = "2011",
doi = "10.2308/accr.00000014",
language = "English",
volume = "86",
pages = "237--258",
journal = "The Accounting Review",
issn = "0001-4826",
publisher = "American Accounting Association",
number = "1",

}

RIS

TY - JOUR

T1 - Do investors understand really dirty surplus?

AU - Landsman, W R

AU - Miller, B L

AU - Peasnell, K V

AU - Yeh, S

PY - 2011

Y1 - 2011

N2 - 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.

AB - 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.

U2 - 10.2308/accr.00000014

DO - 10.2308/accr.00000014

M3 - Journal article

VL - 86

SP - 237

EP - 258

JO - The Accounting Review

JF - The Accounting Review

SN - 0001-4826

IS - 1

ER -