Equity method (EM) reporting of off-balance sheet investments offers managers discretion to manipulate earnings and keep the debt of their investments off their own balance sheet. Consistent with these concerns, our results suggest that the use of EM reporting negatively affects the quality of earnings information. The evidence also suggests that managers of U.S. firms take advantage of the discretion provided by the EM to conceal debt. These results are especially relevant when the investment is a joint venture. The analysis shows that financial markets incorporate into prices any expected loss of informativeness derived from the reporting of off-balance investments.
JEL classification: G1, M48
Key words: Off-balance sheet investments, equity method accounting, financial reporting information quality
학회소식
학회소식
[2010년 제 2차] Off-Balance Sheet Investments, Earnings Quality and
작성자 : 관리자
조회수 : 1059
게시일 :
2010-06-08
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