No abstract

This paper examines whether the intent-based fair value disclosures by security type under SFAS No. 115 explain the value of bank equity. Focusing on available-for-sale (AFS) and held-to-maturity (HTM) securities, we find both AFS and HTM value differences (fair less book values) explain the value of bank equity. The AFS value differences also explain raw stock returns and abnormal returns, while the HTM value differences explain only the raw returns. The AFS value differences have greater explanatory power than those of the HTM. The explanatory power of the securities' value differences increases when they are considered as separate (AFS and HTM) variables rather than in aggregation. Also, the AFS value differences explain one-year-ahead bank earnings, while the HTM value differences do not. These results remain robust across the different model specifications examined. Overall, they are consistent with our hypotheses and with the view of SFAS No. 115 on the relevance and usefulness of the fair value disclosures to investors.

No abstract

New regulations instituted in 1992 by the SEC require that estimates of the values of executive stock option grants now be included in proxy statement reports on senior executive compensation. We examine the character of firms' reporting choices under the new rules, from a large sample of the first round of proxy statements issued. We find that the majority of firms have elected a reporting approach that provides little additional information to investors, and appear at least in part to have done so because the alternative approach would have caused them to report above-average stock option compensation amounts for their executives.