Comprehensive Income: Who's Afraid of Performance Reporting?
By Linda Smith Bamber, John (Xuefeng) Jiang, K. Petroni, I. Wang. Accounting Review, 2010
160 citations recorded by the source corpus.
ABSTRACT: Firms can report comprehensive income in either an income-statement-like performance statement or the statement of equity. Traditional theories of contracting incentives cannot explain this reporting location choice that only affects where comprehensive income data appear, because the contractible values of net income, other comprehensive income items, and comprehensive income are exactly the same regardless of the location where the firm reports comprehensive income. Drawing on theory, analysis of comment letters, and results of survey-based and behavioral research, we identify two factors—equity-based incentives and concerns over job security—that help explain why most firms do not follow policymakers' preference to report comprehensive income in a performance statement. Our empirical evidence on a broad cross-section of firms shows that managers with stronger equity-based incentives and less job security are significantly less likely to use performance reporting. Overall, our study suggests that even though the reporting location choice is inconsequential in a traditional rational markets view, managers act as if they believe that comprehensive income reporting location matters.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/25c1efa2249b0e57f2559ec89146b46882f111ce
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Citations in the corpus
- Bank earnings and regulatory capital management using available for sale securities (2017, unknown): “For example, several studies find that other comprehensive income, particularly the unrealized securities gains and losses component, is value relevant (e.g., Dhaliwal et al. 1999; Biddle and Choi 2006; Chambers et al. 2007; Bamber et al. 2010).”
- Comparing the Value Relevance, Predictive Value, and Persistence of Other Comprehensive Income and Special Items (2011, background): “Researchers have also generally assumed OCI gains and losses to be transitory (Linsmeier et al. 1997; Barker 2004; Chambers et al. 2007; Yen et al. 2007; Bamber et al. 2010), but for different reasons.”