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
Citation
CHENG, Qiang; Frischmann, Peter; and Warfield, Terry.
The market perception of corporate claims. (2003). Research in Accounting Regulation. 16, 3-28.
Available at: https://ink.library.smu.edu.sg/soa_research/832
Copyright Owner and License
Publisher
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/S1052-0457(02)16001-2