SEC filings, regulatory deadlines, and capital market consequences

SYNOPSIS: Timely disclosure of financial statement information is a critical requirement for firms and wellfunctioning capital markets. Yet, every quarter or year, a non-trivial number of firms are late in filing their financial statements. This paper identifies and probes various capital market consequences for late filings of quarterly and annual financial statements. It examines the short- and long-window reaction to late filings, as well as how equity investors process statements accompanying late filing announcements, such as managers declaring intentions to file within/outside the SEC’s allowed grace periods. This paper documents that delayed quarterly filings have distinctly different valuation implications than delayed annual filings over the short and long run, and that accounting problems play a unique role in signaling the seriousness of the delay. It also shows that investors do not accept management’s delay-related assertions at face value, and that delayed filing announcements signal continued poor performance that is not fully reflected in stock prices at the time the announcements are made. Overall, this paper sheds new light on important capital market consequences of filing financial statements late

Mechanisms to Meet/Beat Analyst Earnings Expectations in the Pre- and Post-Sarbanes-Oxley Eras

This paper asks two questions. First, has the prevalence of expectations management to meet/beat analyst expectations changed in the aftermath of the 2001-2002 accounting scandals and the passage of the 2002 Sarbanes-Oxley Act (SOX)? Second, has the mix among the three mechanisms used for meeting earnings targets: accrual earnings management, real earnings management, and earnings expectations management shifted in the Post-SOX Period? We document that the propensity to meet/beat analyst expectations has declined significantly in the Post-SOX Period. Our primary findings explain this pattern. In particular, we find a decline in the use of expectations management and accrual management, and no change in real earnings management in the Post-SOX Period relative to the preceding seven-year period. Our results are robust to controlling for varying macro economic conditions. These findings contribute to the academic literature, investors, and regulators

Mechanisms to Meet/Beat Analyst Earnings Expectations in the Pre- and Post-Sarbanes-Oxley Eras

This paper asks two questions. First, has the prevalence of expectations management to meet/beat analyst expectations changed in the aftermath of the 2001-2002 accounting scandals and the passage of the 2002 Sarbanes-Oxley Act (SOX)? Second, has the mix among the three mechanisms used for meeting earnings targets: accrual earnings management, real earnings management, and earnings expectations management shifted in the Post-SOX Period? We document that the propensity to meet/beat analyst expectations has declined significantly in the Post-SOX Period. Our primary findings explain this pattern. In particular, we find a decline in the use of expectations management and accrual management, and no change in real earnings management in the Post-SOX Period relative to the preceding seven-year period. Our results are robust to controlling for varying macro economic conditions. These findings contribute to the academic literature, investors, and regulators

Post Loss/:Profit Announcement Drift

We document a market failure to fully respond to loss/profit quarterly announcements. The annualized post portfolio formation return spread between two portfolios formed on extreme losses and extreme profits is approximately 21 percent. This loss/profit anomaly is incremental to previously documented accounting-related anomalies, and is robust to alternative risk adjustments, distress risk, firm size, short sales constraints, transaction costs, and sample periods. In an effort to explain this finding, we show that this mispricing is related to differences between conditional and unconditional probabilities of losses/profits, as if stock prices do not fully reflect conditional probabilities in a timely fashion

K-Ar age determinations of some Miocene-Pliocene basalts in Israel: their significance to the tectonics of the Rift Valley

Thirty samples of Upper Tertiary basalts intruding marine and continental sequences were by the K-Ar method. Four volcanic phases are recorded: (a) 24.8±1.5 Ma of the Raqabat e Na'ame dike in Central Sinai; (b) 20.4±0.7 Ma of basalt intrusions in Central Sinai and the Arava. Some of these are offset by E-W to NE-SW dextral faults of the Central Sinai - Negev Shear Zone; (c) 14.5±0.3 to 4.9±1.3 Ma of basalt flows in the Eastern Galilee and the Coastal Plain; (d) 2.7±0.6 Ma of ‘En Yahav dike. These results contribute to the correlation between Tertiary continental formations from different areas, and put limits on the age of tectonic events, such as folding in the Syrian arc, faulting in the Central Sinai - Negev Shear Zone and shearing along the Jordan Rif

Stock Option Expense, Forward-Looking Information, and Implied Volatilities of Traded Options

Prior research generally finds that firms underreport option expense by managing assumptions underlying option valuation (e.g. they shorten the expected option lives), but it fails to document management of a key assumption, the one concerning expected stock-price volatility. Using a new methodology, we address two questions: (1) To what extent do companies follow the guidance in FAS 123 and use forward looking information in addition to the readily available historical volatility in estimating expected volatility? (2) What determines the cross-sectional variation in the reliance on forward looking information? We find that firms use both historical and forward-looking information in deriving expected volatility. We also find, however, that the reliance on forward-looking information is limited to situations where this reliance results in reduced expected volatility and thus smaller option expense. We interpret this finding as managers opportunistically use the discretion in estimating expected volatility afforded by FAS 123. In support of this interpretation, we also find that managerial incentives play a key role in this opportunism

Exchange Rate Variability and the Riskiness of U.S. Multinational Firms:Evidence from the Breakdown of the Bretton Woods System

This study assesses the impact of exchange rate variability on the riskiness of U.S. multinational firms by examining the relation between exchange rate variability and stock return volatility and by decomposing this relation into components of systematic and diversifiable risk. Focusing on two periods around the 1973 switch from fixed to floating exchange rates, we find a significant increase in the volatility of U.S. multinational monthly stock returns corresponding to the period of increased exchange rate variability. This increase in stock return volatility is also significant relative to the increase in stock return volatility for firms in three control samples. Using a single factor market model, we show this increase in total volatility led to a significant increase in market risk (beta) for the multinational firms relative to the control samples between the two periods. Collectively, these results suggest that the increase in exchange rate variability after 1973 was perceived by investors to be associated with an increase in the riskiness of cash flows of multinational firms that required compensation in terms of higher expected returns.

Mercury stable isotope geochemistry as a tool for tracing sources and chemical transformations in the environment

Mercury (Hg) is a redox active global contaminant. Hg has two stable oxidation states in the environment, Hg(0) and Hg(II). Hg(0) is significantly less soluble than Hg(II) and is less reactive. Hg(II) is very soluble and highly reactive; being able to form methylmercury, a potent neurotoxin. Hg is a health concern due to its neurological effects, ability to cross the blood-brain barrier and umbilical cord in pregnant women, and get biomagnified. Anthropogenic inputs of Hg into the environment are dominantly due to coal burning and artisanal gold and silver mining. Hg stable isotope ratios have been developed since the early 2000s in order to understand Hg cycling in the environment. The three studies reported in this dissertation aim at developing Hg isotope ratios as tools for source apportionment, identifying Hg chemical transformations in a contaminated environment, and understanding the interaction between dissolved Hg(0) and Hg(II). In the first study, Hg isotopes were used to apportion different Hg sources into Emory and Clinch Rivers in Tennessee, USA. Following a coal ash spill into the Emory River, elevated Hg concentrations were detected; however, there is a known Hg contamination entering the Clinch from upstream of the spill extent. Hg isotope ratios were used to apportion all the Hg inputs into the Emory and Clinch Rivers. The second study attempted to use Hg isotopes in order to detect and quantify natural chemical transformations of Hg in a contaminated creek. The East Fork Poplar Creek is a contaminated creek that runs through the DOE Y-12 plant in Oak Ridge, Tennessee, USA. The Y-12 plant historically used large amounts of Hg which released into the creek and the surrounding floodplain. Hg isotopes were used to identify the probable chemical transformations occurring naturally in the creek’s waters and quantified them. Finally, laboratory experiments were conducted in order to better understand the interaction between dissolved Hg(0) and Hg(II). Hg(0) and Hg(II) species are expected to be in contact in any environment in which Hg is getting actively chemically transformed; however, no studies have looked into the interaction between these two dissolved species. The results of these exchange experiments show that Hg(0) and Hg(II) have the ability to exchange isotopes very quickly, which will have implications for interpreting field isotope data

Mechanisms to Meet/Beat Analyst Earnings Expectations in the Pre- and Post-Sarbanes-Oxley Eras

This paper asks two questions. First, has the prevalence of expectations management to meet/beat analyst expectations changed in the aftermath of the 2001-2002 accounting scandals and the passage of the 2002 Sarbanes-Oxley Act (SOX)? Second, has the mix among the three mechanisms used for meeting earnings targets: accrual earnings management, real earnings management, and earnings expectations management shifted in the Post-SOX Period? We document that the propensity to meet/beat analyst expectations has declined significantly in the Post-SOX Period. Our primary findings explain this pattern. In particular, we find a decline in the use of expectations management and accrual management, and no change in real earnings management in the Post-SOX Period relative to the preceding seven-year period. Our results are robust to controlling for varying macro economic conditions. These findings contribute to the academic literature, investors, and regulators