Abstract
The purpose of this study is to examine the behavior of the security prices of certain companies which complied with the S.E.C.'s ASR#190 for the year ended December 31, 1976. This study is significant in that it permits the examination of whether or not any additional economic information was provided by disclosure of the replacement cost of inventory and gross property plant and equipment. If economic information was provided, there will be an effect on the market prices of the securities of the complying companies. The results of this study could be beneficial to the Securities and Exchange Commission and the Financial Accounting Standards Board in their evaluations of replacement cost rules. They must continuously answer the question: Is the benefit the investor receives, commensurate with the cost the corporation incurs? One must remember that the cost, to the corporation, is reflected in the net income reported in the financial statements. Thus, not only must the SEC evaluate the effect of the information, they must also evaluate the cost/benefit relationship. The Financial Accounting Standards Board has adopted FASB Statement #33 which adopts replacement cost accounting and price level accounting. This study could also benefit them. There are a few significant differences between this study and the more efficient market studies which precede it. Most of the previous EMH studies which have been undertaken have concerned areas in which adoption of the examined change was voluntary. The change being examined here is a mandatory change for those firms meeting the criteria set forth by the Securities and Exchange Commission. Also, the topic of replacement cost accounting is a widely discussed area in the accounting profession as is indicated earlier in this paper. As was also discussed earlier, this requirement has been implemented at a time when inflation is at or near its worst level in the history of the United States' Economy. Consequently, the effect, if any, which A.S.R.#190 has on the return of securities is of significant interest. The null and alternative hypotheses forth is study are...
Lane, Michael Robert (1980). An empirical examination of the effect of ASR#190 on the stock prices of certain companies. Texas A&M University. Texas A&M University. Libraries. Available electronically from
https : / /hdl .handle .net /1969 .1 /DISSERTATIONS -658238.