Patrick E. Hopkins

Comprehensive income reporting and analysts' valuation judgments

This paper investigates whether clear reporting of comprehensive income (CI) and its components facilitates detection of earnings management by buy-side financial analysts and predictably affects their common stock price judgments. Financial reporting standards allow companies considerable flexibility in determining which accounts are aggregated into the individual line items in the primary financial statements. Because of the difficulty inherent in assessing the relevance and persistence of these amounts, users of financial accounting information often

The Effect of Financial Statement Classification of Hybrid Financial Instruments on Financial Analysts' Stock Price Judgments

This paper investigates whether the balance sheet classification of financial instruments that include attributes of both debt and equity (i.e., hybrid financial instruments) affects the stock price judgments of buy-side financial analysts. Financial economics research documents that, on average, firms announcing an offering of additional common equity securities experience a decline in the market value of their outstanding common stock. In contrast, firms financing with straight debt generally do not experience a decline in common stock market value (see Smith [1986] for a summary). Psychology research suggests that, when making

Fair Value Measurement in Financial Reporting

This monograph provides a historically informed discussion of conceptual and procedural issues related to the use of the fair value measurement attribute in financial reporting. Our goal is to provide a structure, based on the conceptual frameworks of the Financial Accounting Standards Board and International Accounting Standards Board, for researchers’ evaluations of empirical research studies that investigate the informational properties of all measurement bases, including fair values. We begin by defining, addressing misconceptions about, and providing a brief history of the fair value measurement 1400000030attribute. We next discuss decision usefulness of fair value and other measurement bases, and describe and evaluate examples of empirical research that documents the decision usefulness of recognized and disclosed fair value information, focusing on predictive ability, value relevance, and risk relevance.We also discuss the role of verifiability in the context of relevant and faithfully represented accounting information; describe three untested, verifiability-related maintained assumptions that arise in discussions of fair-value-measurement research; and discuss research designs for investigating questions related to accounting measurement verifiability. Finally, we discuss claims that use of the fair value measurement attribute causes procyclical behavior among financial institutions and that accounting standards have become increasingly fair-value-oriented during the last two decades.