Beverly B. Marshall

Utilizing firms in the S&P 500, we study whether greater transparency in the reporting of other comprehensive income (OCI) items, as mandated by ASU 2011-05, resulted in a reduction in information asymmetry, a change in the value relevance of this information, or a change in hedging practice. Our results show that while transparent reporting reduced information asymmetry, firms that engage in cash flow hedging do have greater information asymmetry than their counterparts that do not hedge. We find evidence that investors penalize firm value for greater volatility of OCI relative to net income volatility when reported transparently. When permitted, managers were able to mitigate the negative impact by reporting OCI only in the Statement of Shareholders’ Equity. We conclude that managers’ concerns regarding potential confusion surrounding OCI volatility following more prominent reporting led to changes in hedging behavior. After transparent reporting, we find a reduced likelihood of foreign currency cash flow (FXCF) hedges and a reduced level of FXCF hedging among firms experiencing the greatest volatility of unrealized hedging gains and losses.

We study the impact of online buzz prior to internet firms’ Initial Public Offerings (IPOs) on market valuation of their common stock through the first two years. Using economics of information theories, cheap talk, and costly state falsification, we hypothesize that the quantity of buzz influences shareholder value. We find that high levels of buzz in the year prior to the offering are associated with higher company valuations at the IPO and for the following two years. Our findings suggest that online buzz serves as a costly state falsification signal that is not cheap talk; rather, it acts as a risk reducer for the underwriter and represents qualitative information about the issuer. This research adds to the IPO literature by empirically testing a new determinant of IPO value, online buzz. This information on the marketing and selling of stock, a financial instrument, also has implications for valuing other long-term assets.

The Wall Street Journal (WSJ) annually publishes a list of the fifty “best” private companies that are funded by venture capitalists. Given the important role

What happened to the global initial public offering (IPO) market after the Sarbanes‐Oxley Act was passed in 2002? Press reports suggest that Sarbanes‐Oxley made U.S. markets less competitive compared to the rest of the world‐causing a drop in IPOs. The authors argue that past heavy U.S. IPO activity created thousands of jobs‐and those days are gone. But who is to blame? Is increased regulation the cause?

We examine the governance characteristics, earnings quality, growth rates, dividend policy, and compensation structure of 97 firms recently under investigation by the Securities and Exchange Commission (SEC) for accounting fraud. Our results show that the corporate environment most likely to lead to an accounting scandal manifests significant growth and accounting practices that are already pushing the envelope of earnings smoothing. Firms operating in this environment seem more likely to tip over the edge into fraud if there are fewer outsiders on the audit committee and outside directors appear overcommitted.

Purpose – This paper aims to extend the work by Vafeas and Lie and Lie by developing an empirical model of choice among four alternative mechanisms for distributing cash from corporations to shareholders: a fixed-price self-tender offer, a Dutch auction self-tender offer, an open market share repurchase, and a special dividend. Design/methodology/approach – A multinomial logit (MNL) model adapted for choice-based sampling is used to examine the factors that influence a firm's choice among the four methods. Findings – Firms with a high degree of heterogeneity in shareholder valuations tend to select an open market repurchase, while firms with low levels of heterogeneity choose a special dividend. Firms already paying high dividends are more likely to issue a special dividend than institute an open market repurchase. A firm with poor stock performance prior to the announcement is more likely to choose a fixed-price self-tender offer or open market share repurchase. On the other hand, firms are more likely to follow strong performance with a special dividend. Contrary to Persons' model, it is found that firms facing a takeover threat are more likely to choose a fixed-price tender offer than a Dutch auction. Practical implications – It is shown that the ownership structure, current payout level; the size of the distribution, and the degree of stock undervaluation are among the most important determinants of a firm's choice among alternative payout methods. Originality/value – This study adds to the existing literature by developing the first empirical model of choice among all four one-time (or infrequent) corporate cash disbursement methods. It is also the first to adjust the MNL estimates for the choice-based sampling method used to collect the data.