Publication Type

Journal Article

Version

publishedVersion

Publication Date

2003

Abstract

This paper examines the economic substance of a broad range of securities by investigating their association with systematic risk and prices. The analysis is motivated by continuing security innovation and its impact on hybrid security reporting. Based on a sample of 2,617 firms that reported minority interests or preferred stock during 1993–1997, the results indicate that redeemable preferred securities (including trust preferred stock) are not viewed by the market as either debt or equity, suggesting dichotomous security classification may lack representational faithfulness. Inconsistent with their treatment in the financial statements, non-redeemable preferred stock and minority interests are viewed as debt-like and equity-like respectively. Additional analyses document that the systematic risk and pricing results vary based on firm size, performance, and bond rating.

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

Research in Accounting Regulation

Volume

16

First Page

3

Last Page

28

ISSN

1052-0457

Identifier

10.1016/S1052-0457(02)16001-2

Publisher

JAI Press

Copyright Owner and License

Publisher

Additional URL

https://doi.org/10.1016/S1052-0457(02)16001-2

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