AN EMPIRICAL INVESTIGATION OF THE SECURITY MARKET REACTION TO MULTINATIONAL ACCOUNTING CHANGES: STATEMENT OF FINANCIAL ACCOUNTING STANDARD NUMBER 52, FOREIGN CURRENCY TRANSLATION.

摘要

In December 1981, the Financial Accounting Standards Board (FASB) issued statement of Financial Accounting Standard (SFAS) Number 52 which became effective for fiscal years beginning on or after December 15, 1982. The new foreign currency standard (SFAS Number 52) differs significantly from the preceding standard, SFAS Number 8.;In order to test the security market reaction to SFAS Number 52, the Capital Asset Pricing Model and the Arbitrage Pricing Model were employed. According to both models, the return on an asset is a linear function of market factor/(s). These models were used to predict the expected returns. The behavior of the residuals, calculated as the difference between actual returns and conditional returns, were examined.;The sample for statistical tests consists of 125 multinational corporations MNC and 113 domestic firms. The multinational firms were subdivided into Early adopters and Late adopters, Behavior changed and Behavior unchanged portfolios.;One hundred and sixty-one multinational firms responded to the questionnaire. The respondent firms were further classified into Early adopters and Late adopters, Behavior changed and Behavior unchanged, and Critical and Noncritical groups. The respondent firms were used specifically to assess whether information producers prefer SFAS Number 52 vis-a-vis SFAS Number 8.;The purpose of this study was to investigate security market reaction to SFAS Number 52, and to assess whether information producers prefer the new foreign currency translation policy, SFAS Number 52.;The results of the tests were analyzed in two stages. In the first stage, the cumulative average residuals for experimental and control portfolios were compared using 't' tests. In the second stage, the information producers' perceptual rankings of SFAS Number 52 vis-a-vis SFAS Number 8 were examined.;The overall conclusion of the study was that there is no statistically significant security market reaction to SFAS Number 52. The information producers preferred SFAS Number 52 vis-a-vis SFAS Number 8 in terms of its impact on volatility of earnings while SFAS Number 8 is preferred to SFAS Number 52 with respect to its effect on stock prices. The net result is that SFAS Number 52 is not better than SFAS Number 8.