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The Effects of the Reporting of Off‐Balance‐Sheet Investments on EPS Uncertainty, Leverage and Shareholders’ Wealth
Author(s) -
Mantecon Tomas,
Conover James,
Altintig Acya,
Song Kyojik
Publication year - 2012
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2012.01195.x
Subject(s) - business , equity (law) , balance sheet , leverage (statistics) , shareholder , debt , stock (firearms) , monetary economics , finance , financial economics , economics , corporate governance , mechanical engineering , machine learning , political science , computer science , law , engineering
The degree of control over operations affects the quality of information provided to investors. Uncertainty about operating performance increases following the first equity method (EM) reporting of off‐balance‐sheet investments, but only when the investments are joint ventures (JVs). Partners in JVs report lower levels of debt. These results are not due to informational deficiencies of the EM, but to the riskier nature of JVs. Long‐run stock performance analysis indicates that investors experience normal risk‐adjusted returns when investing in firms with economically significant off‐balance sheet investments.