Seminar by Joshua Ronen

SALA SEMINARI – 1° PIANO, PALAZZO LEVI CASES, VIA DEL SANTO 33 - ORE 9.30

18.10.2018

Seminar by Joshua Ronen, NYU Stern School of Business

Title: “Effects of the Leases Exposure Draft on Loan Spreads and Analyst Dispersion” (co-authored by Lin Qiu)

Abstract:
We examine whether market perception of firms’ future default risk increases, as manifested in market measures of risk, upon issuance of the 2010 exposure draft (ED) proposing capitalization of most operating leases. Employing a difference-in-differences design, we find a significant increase in loan spread and credit default swap (CDS) premia for firms with high operating leases. Expecting that the ED causes analysts to converge in the way they predict the effects of leases on earnings predictions, we also document a decrease in analyst dispersion for firms with high operating leases. Cross-sectional tests show the effect to be more pronounced in firms with lower disclosure reliability and longer lease maturity. This study innovates by considering anticipatory effects of exposure drafts. Our findings contribute to the debate surrounding differential effects of recognition versus disclosure.