Do the FASB's standards add shareholder value?

Journal Article (Journal Article)

We examine the cost-effectiveness, from the shareholders' perspective, of the accounting standards issued by the FASB during 1973-2009. We evaluate (1) the stock market reactions of firms affected by the standards surrounding events that changed the standard's probability of issuance; and (2) whether the market reactions are related, in the cross-section, to agency problems, information asymmetry, proprietary costs, contracting costs, and changes in estimation risk. The average standard is a non-event from the investors' perspective because 104 of the 138 standards examined are associated with no change in shareholder value. Nineteen (15) standards are associated with a decrease (increase) in shareholder value. Surprisingly, 25 standards are associated with an increase in estimation risk. In the cross-section, firms with higher levels of information asymmetry, lower contracting costs, and a decrease in estimation risk experience most positive returns.

Full Text

Duke Authors

Cited Authors

  • Khan, U; Li, B; Rajgopal, S; Venkatachalam, M

Published Date

  • March 1, 2018

Published In

Volume / Issue

  • 93 / 2

Start / End Page

  • 209 - 247

International Standard Serial Number (ISSN)

  • 0001-4826

Digital Object Identifier (DOI)

  • 10.2308/accr-51840

Citation Source

  • Scopus