IASB changes on leasing - A study discovering the impact of lease disclosures in the assessment of equity risk

Anastasia Kraft; Kerstin Lopatta

doi:10.1504/IJAAPE.2013.050622

IASB changes on leasing - A study discovering the impact of lease disclosures in the assessment of equity risk

Anastasia Kraft
, Kerstin Lopatta

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

1 Citation (Scopus)

Abstract

We investigate the relationship between equity risk and operating risk as well as equity risk and financial risk by analysing different levels of leverage, reported debt and earnings volatility of German listed companies. The results suggest that the measurement of equity risk is based on the variability in ROA. For firms that already have higher operating risk, investors include operating leases in the measurement of equity risk in addition to operating risk and reported financial risk. For firms with lower variability in ROA, the assessment of equity risk relates only to reported financial risk and operating risk; in addition, off-balance sheet debt is not significant in explaining variations in stock returns. Since reported debt and off-balance sheet debt are not treated equally, a mandated recognition of all lease contracts is expected to enhance the assessment of equity risk for firms with lower variability in earnings. Copyright © 2013 Inderscience Enterprises Ltd.

Original language	English
Pages (from-to)	27-57
Journal	International Journal of Accounting, Auditing and Performance Evaluation
Volume	9
Issue number	1
DOIs	https://doi.org/10.1504/IJAAPE.2013.050622
Publication status	Published - 2013
Externally published	Yes

Bibliographical note

Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

Research Keywords

Business risk
Equity risk
Financial risk
Lease accounting
Leases
Off-balance sheet financing
Operating leases
Operating risk
Recognition versus disclosure
The efficient market hypothesis

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title = "IASB changes on leasing - A study discovering the impact of lease disclosures in the assessment of equity risk",

abstract = "We investigate the relationship between equity risk and operating risk as well as equity risk and financial risk by analysing different levels of leverage, reported debt and earnings volatility of German listed companies. The results suggest that the measurement of equity risk is based on the variability in ROA. For firms that already have higher operating risk, investors include operating leases in the measurement of equity risk in addition to operating risk and reported financial risk. For firms with lower variability in ROA, the assessment of equity risk relates only to reported financial risk and operating risk; in addition, off-balance sheet debt is not significant in explaining variations in stock returns. Since reported debt and off-balance sheet debt are not treated equally, a mandated recognition of all lease contracts is expected to enhance the assessment of equity risk for firms with lower variability in earnings. Copyright {\textcopyright} 2013 Inderscience Enterprises Ltd.",

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author = "Anastasia Kraft and Kerstin Lopatta",

note = "Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].",

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AU - Kraft, Anastasia

AU - Lopatta, Kerstin

N1 - Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

PY - 2013

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N2 - We investigate the relationship between equity risk and operating risk as well as equity risk and financial risk by analysing different levels of leverage, reported debt and earnings volatility of German listed companies. The results suggest that the measurement of equity risk is based on the variability in ROA. For firms that already have higher operating risk, investors include operating leases in the measurement of equity risk in addition to operating risk and reported financial risk. For firms with lower variability in ROA, the assessment of equity risk relates only to reported financial risk and operating risk; in addition, off-balance sheet debt is not significant in explaining variations in stock returns. Since reported debt and off-balance sheet debt are not treated equally, a mandated recognition of all lease contracts is expected to enhance the assessment of equity risk for firms with lower variability in earnings. Copyright © 2013 Inderscience Enterprises Ltd.

AB - We investigate the relationship between equity risk and operating risk as well as equity risk and financial risk by analysing different levels of leverage, reported debt and earnings volatility of German listed companies. The results suggest that the measurement of equity risk is based on the variability in ROA. For firms that already have higher operating risk, investors include operating leases in the measurement of equity risk in addition to operating risk and reported financial risk. For firms with lower variability in ROA, the assessment of equity risk relates only to reported financial risk and operating risk; in addition, off-balance sheet debt is not significant in explaining variations in stock returns. Since reported debt and off-balance sheet debt are not treated equally, a mandated recognition of all lease contracts is expected to enhance the assessment of equity risk for firms with lower variability in earnings. Copyright © 2013 Inderscience Enterprises Ltd.

KW - Business risk

KW - Equity risk

KW - Financial risk

KW - Lease accounting

KW - Leases

KW - Off-balance sheet financing

KW - Operating leases

KW - Operating risk

KW - Recognition versus disclosure

KW - The efficient market hypothesis

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U2 - 10.1504/IJAAPE.2013.050622

DO - 10.1504/IJAAPE.2013.050622

M3 - RGC 21 - Publication in refereed journal

SN - 1740-8008

VL - 9

SP - 27

EP - 57

JO - International Journal of Accounting, Auditing and Performance Evaluation

JF - International Journal of Accounting, Auditing and Performance Evaluation

IS - 1

ER -

IASB changes on leasing - A study discovering the impact of lease disclosures in the assessment of equity risk

Abstract

Bibliographical note

Research Keywords

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