Contemporary Accounting Research · 1997 · 26 citations · 15 references
BusinessAccountancyFinanceCapital StructureCorporate FinanceFinancial EconomicsCapital Structure DeterminantsDebt FinancingDisclosure TheoryEarnings ReportingEquity ReportingFinancial StatementsEarnings Claim DisclosureEquity Conversion FeaturesFinancial Leverage EffectsInformation Asymmetry EffectsLimited Liability ConstraintsMarket Reactions To Accounting InformationMarket Share Response To Pricing
The study formalizes how earnings disclosures affect security and debt prices under limited liability and examines how leverage and conversion features modify the price‑earnings relationship. The authors derive nonlinear relationships between equity prices and earnings under various capital structure assumptions, link them to empirical findings, and assess the impact of leverage and conversion features on the price‑earnings link. Abstract.
Abstract. We formalize the effects of an earnings disclosure on security prices under an assumption of limited liability. We derive various nonlinear relations between equity prices and earnings under a variety of capital structure assumptions and. if possible, we tie the relations attained to results from the existing empirical literature. We also characterize how debt prices respond to earnings when holders of debt have limited liability. Finally, we analyze how changes in the degree of leverage and conversion features of debt affect the relation between price and earnings.
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The information content of losses
Carla Hayn · Journal of Accounting and Economics · 1995 · 2.5K citations