Earnings management through transaction structuring: Contingent convertible debt and diluted earnings per share

Article Abstract:

An examination of whether firms structure their convertible bond transactions to manage diluted earnings per share (EPS) is conducted. It is found that the likelihood of firms issuing contingent convertible bonds (COCOs), which are often excluded from diluted EPS calculations under Statement of Financial Accounting Standard (SFAS) 128, is significantly associated with the reduction that would occur in diluted EPS if the bonds were traditionally structured.

United States, Legal issues & crime, Government regulation (cont), Government regulation, Legal/Government Regulation, Laws, regulations and rules, Financial Accounting Standards Board, Earnings per share, Convertible bonds

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Do accruals drive firm-level stock returns? A variance decomposition analysis

Article Abstract:

Details about a study that applies the variance decomposition structure to examine the comparative value significance of accrual, cash flow, and expected-return information in influencing firm-level stock returns are presented. Three models are employed, which reveal that variations in anticipated future accruals are one of the key forces behind current stock returns.

Capital funds & cash flow, Accrual Accounting, Evaluation, Stocks, Accounting and auditing, Accrual basis accounting

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