Does SFAS 166/167 Decrease Information Asymmetry of Securitizing Banks?

Beginning in 2010, mandated Financial Accounting Standards No. 166 and 167 (SFAS 166/167) changed the consolidation rules of securitization entities and required firms to disclose more information about their securitization activities. This study provides evidence on the effects of SFAS 166/167 on the information asymmetry of securitizing banks. First, I find that securitizing banks experienced a decrease in information asymmetry from the pre- to the post-SFAS 166/167 periods. Second, I show that, following SFAS 166/167, the decrease in information asymmetry is largest for commercial loans and smallest for mortgages. Finally, I present evidence that more visible securitizing banks are less sensitive to SFAS 166/167. To rule out the confounding effects of the financial crisis of 2007-2009, I use two different matched samples and I report that (1) securitizing banks experience a larger decrease in information asymmetry from the pre- to the post-SFAS 166/167 periods than non-securitizing banks, and (2) US securitizing banks experience a larger decrease in information asymmetry from the pre- to the post-SFAS 166/167 periods than European securitizing banks. These inferences are robust to a number of alternative specifications and variable definitions. This study is the first to provide evidence for the disclosure and accounting implications of SFAS 166/167 for securitizing banks.

Is It Time for Popcorn? Daily Box Office Earnings and Aggregate Stock Returns (with Steve Fortin)

We quantitatively measure the interactions between the discretionary consumption and the stock market using daily theatrical box office earnings. We document a statistically significant positive association between changes in box office earnings and daily aggregate stock returns. Our results suggest that changes in box office earnings can predict stock returns up to 4 days. We also demonstrate a hypothetical zero-cost trading strategy using changes in box office earnings that yields nontrivial excess returns with little risk. These findings suggest that box office effect is an economically important factor for equities. To the extent that box office earnings capture discretionary consumption, the framework implies that deviations from investors' discretionary consumption trends summarize agents' expectations of future returns on the market portfolio.

Advertising and Firm Market Value: How Advertising Media Vehicles Make a Difference (with Doga Istanbulluoglu)

This research aims to advance the literature by identifying how five advertising media vehicles (television, press, cinema, online and outdoor) influence firms' market value. Previous research highlights the influence of advertising on firms' market value, but do not delve into the effects of advertising media vehicles. Employing primary data, which details monthly advertising expenditures of publicly traded FTSE 100 companies over 11 years, this study was able to empirically test how advertising vehicles affect firms' market value. The results show a positive association between firms'; market value, and television advertising and outdoor advertising but indicate a negative association between firms' market value and Internet advertising. The moderating effect of information asymmetry was investigated and shows that when press advertising interacted with information asymmetry, it has a negative impact on firms' market value. Implications for theory and practice were discussed.

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