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We provide evidence regarding two unanswered and consequential questions regarding share trading liquidity, a primary motive for US listings, for the prominent listing cohort of foreign-firm US initial public offerings (FIPOs). First, we test whether FIPOs exhibit a 'liability of foreignness (Bell et al. 2012) in liquidity' (LFL) compared with matched domestic-firm IPOs (DIPOs), despite listing requirements that are more stringent than for the mature cross-listed foreign firms studied previously. Second, we test whether US IPO LFL is moderated by FIPO home country institutional attributes that promote liquidity. Our findings for 327 FIPOs from 36 countries between 1990 and 2012 reveal that US IPO LFL is moderated, but not eliminated, by FIPO home country attributes, thus indicating incomplete bonding with US institutions. These findings extend prior research and serve to inform foreign firms considering US IPOs, exchanges competing for them, listing facilitators, regulators, and investors regarding a salient listing consideration. [ABSTRACT FROM AUTHOR]

Alternative Estimation Methods - Documenting that the reported relationship between accounting conservatism and bankruptcy risk is robust to alternative methods for estimating bankruptcy risk and bankruptcy risk components. By increasing bankruptcy risk and decreasing monitoring and accounting conservatism simultaneously, CDS contracts may weaken or eliminate negative relations between conservatism and bankruptcy risk. The potential of SOX enactment to thereby enhance accounting conservatism's effects on bankruptcy risk must take into account SOX related and contemporaneous effects on bankruptcy risk. Alternative Measures for Accounting Conservatism and Bankruptcy Risk B - b Documenting that the reported relationship between accounting conservatism and bankruptcy risk is robust to using alternate measures of accounting conservatism and alternative measures of bankruptcy risk including actual bankruptcy. [Extracted from the article]

For a large sample of U.S. listed firms, we find that unconditional and conditional accounting conservatism help lower bankruptcy risk. We further find that the mitigating effect of accounting conservatism on bankruptcy risk functions via cash enhancement and earnings management mitigation channels. This evidence is relevant to accounting standards setting, financial regulation, financial risk management, and helps explain conservatism's long-standing presence as a pervasive feature of financial accounting. [ABSTRACT FROM AUTHOR]

The article is a reply to comments concerning the author's article about inventory costing and managerial decisions. Two hypotheses are mentioned: the anticipations hypothesis where managers' choices about alternative accounting methods are based on predictions of future costs and benefits associated with each method; and the incentives hypothesis where managers react to the tax-related cash-flow incentives that result from last in, first out (LIFO) and first in, first out (FIFO) alternatives and operating decisions regarding year-end inventory levels. The conclusion is that both hypotheses predict identical associations between LIFO and FIFO decisions and the patterns of year-end inventories.

This study distinguishes between incremental and relative information content. Incremental comparisons ask whether one accounting measure provides information content beyond that provided by another, and apply when one measure is viewed as given and an assessment is desired regarding the incremental contribution of another (e.g., a supplemental disclosure). Relative comparisons ask which measure has greater information content, and apply when making mutually exclusive choices among alternatives, or when rankings by information content are desired (e.g., when comparing alternative disclosures). Questions of both incremental and relative information content arise frequently in accounting. However, few previous studies have examined questions of relative information content. Possible explanations include unfamiliarity with the relative versus incremental distinction, and the additional statistical complexity involved in testing for relative information content. First, we examine analytically the relation between incremental and relative information content, demonstrating that they address different research questions and require different tests for statistical significance. Second, we identify accounting research contexts in which questions of relative and incremental information content arise. Third, we propose a new regression-based test for relative information content. This test applies to both returns and valuation studies, generalizes to any number of predictor variables, and can be used in conjunction with White's (1980) adjustment for heteroskedasticity. Fourth, we illustrate tests for relative and incremental information content in a familiar research setting that compares the information contents of net income, cash flows, and net sales in 40 industries. [ABSTRACT FROM AUTHOR]

The article comments on the paper by Chi-Wen Jevons Lee about the inventory accounting and earnings/price (E/P) ratios entitled "Inventory Accounting and Earnings/Price Ratios: A Puzzle." The author questions the validity of use of 'ceteris paribus' in Lee's conclusions. The paper compares long-time last in, first out (LIFO) users with non-LIFO firms, or first in, first out (FIFO), and found that LIFO users tend to be larger and more capital intensive with less variable inventories. Companies which adopt LIFO tend to be larger and with less variable inventories and inventory growth. The paper's multivariate model expresses E/P ratios as functions of LIFO and other possible determinants of earnings over price.

Associations between accounting earnings and stock returns are modeled and tested by examining relationships between earnings response coefficients and industry structure characteristics. Response coefficients are estimated using a new approach that does not require proxies for market earnings expectations, This approach appears to be well specified relative to a traditional approach and may have wider applicability in other research contexts. A randomization procedure for controlling for returns dependence is also applied. The results suggest that response coefficients differ considerably across industries and that these differences are related to industry entry barriers, product type, growth, financial leverage, and operating leverage. [ABSTRACT FROM AUTHOR]