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Wednesday, August 4 • 1:00pm - 2:30pm
7D2 Does Earnings Reclassification Change Firm's Information Asymmetry? Evidence from Public Banks and Insurers

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Dan Yang, University of Georgia; James Carson, University of Georgia; Evan Eastman, Florida State University; John Campbell, University of Georgia

In 2016, the Financial Accounting Standard Board (FASB) issued an accounting standard update - FASB No. 2016-01 - that requires equity investments to be measured at fair value with changes in fair value recognized in net income. Prior to the passage of this update, firms reported unrealized gains and losses as other comprehensive income (OCI) for income statement purposes. The earnings reclassification of equity investments will have the most impact on public institutions that hold significant equities measured at fair value, so this study focuses on U.S. public insurers and banks. Specifically, we study how this new earnings reclassification impacts firm’s information asymmetry measured by bid-ask spreads around earnings announcement. Our results show that the earnings reclassification required by FASB No. 2016-01 decreases the bid-ask spreads around earnings announcement for firms with equity investments measured at fair value.

Discussant
Presenters
DY

Dan Yang

University of Georgia
JC

Jim Carson

University of Georgia
avatar for Evan Eastman

Evan Eastman

Florida State University



Wednesday August 4, 2021 1:00pm - 2:30pm EDT