Kevin Ow Yong - Profile on Academia.edu (original) (raw)

Papers by Kevin Ow Yong

Examining the Informational Role of Analysts ’ Forecasts and its Impact on

the Post-Earnings-Announcement-Drift

Making Sense of Numbers: Contemporary Performance and Valuation Metrics

Regulatory Pressure and Income Smoothing in Banks

Fair Value Accounting: SFAS 157 and IAS 39

This study examines the implications of fair value liability gains and losses arising from the ad... more This study examines the implications of fair value liability gains and losses arising from the adoption of Statement of Financial Accounting Standards No. 159 (hereafter FAS 159). We find a positive correspondence between a firm’s FAS 159 fair value liability gains and losses and stock returns. Further analysis indicates that fair value gains and losses from liabilities attributable to the change in a firm’s own credit risk, which are considered counter-intuitive by critics of fair value accounting for liabilities, are also positively related to returns. Lastly, we document that the volatility of earnings that incorporate FAS 159 liability fair value gains and losses is positively associated with market measures of firm risk. Our study contributes to the controversy over recognition of liability fair value gains and losses by providing direct empirical evidence that such gains and losses are perceived as economic income by market participants.

Buying at Market Lows: An Empirical Analysis of Various Portfolio Strategies’ Performance since Sep 11

This study examines the economic implications of fair value liability gains and losses arising fr... more This study examines the economic implications of fair value liability gains and losses arising from the adoption of Statement of Financial Accounting Standards No. 159 (hereafter FAS 159). We find a positive correspondence between a firm’s FAS 159 fair value liability gains and losses and stock returns. Further analysis indicates that fair value gains and losses from liabilities attributable to the change in a firm’s own credit risk, which are considered counter-intuitive by critics of fair value accounting for liabilities, are also positively related to returns. We also document that the volatility of earnings that incorporate FAS 159 liability fair value gains and losses is positively associated with market measures of firm risk. Our study contributes to the controversy over recognition of liability fair value gains and losses by providing direct empirical evidence that such gains and losses are value and risk relevant.

Big data analytics represents a promising area for the accounting and audit professions. We exami... more Big data analytics represents a promising area for the accounting and audit professions. We examine how machine learning applications, data analytics and data visualization software are changing the way auditors and accountants work with their clients. We find that audit firms are keen to use machine learning software tools to read contracts, analyze journal entries, and assist in fraud detection. In data analytics, predictive analytical tools are utilized by both accountants and auditors to make projections and estimates, and to enhance business intelligence (BI). In addition, data visualization tools are able to complement predictive analytics to help users uncover trends in the business process. Overall, we anticipate that the technological advances in these various fields will accelerate in the coming years. Thus, it is imperative that accountants and auditors embrace these technological advancements and harness these tools to their advantage.

Trust in Fair Value Accounting: Evidence from the Field

Journal of International Accounting Research, 2021

We survey stakeholders in the financial reporting process to examine trust in fair value accounti... more We survey stakeholders in the financial reporting process to examine trust in fair value accounting. Though respondents demonstrate high confidence in financial statements, they believe that fair value accounting decreases trust in financial reporting and that preparing fair value numbers is costly but beneficial. They also strongly believe in the Conceptual Framework underlying standard setting. Using multivariate regression analyses, we find that perceiving fair value accounting as beneficial is positively associated with trust in it, consistent with the theory of reasoned action that people engage in behavior (e.g., trust) based on expected positive outcomes of that behavior. We find that this positive association increases with stronger beliefs in the Conceptual Framework. Our paper contributes to the fair value literature by providing general insights on trust in fair value accounting and a specific and novel assessment of how the perceived benefits of fair value accounting inc...

Impact of Basel III on the Discretion and Timeliness of Banks’ Loan Loss Provisions

SSRN Electronic Journal, 2021

The Basel III Accord tightens capital adequacy requirements for banks by increasing the minimum T... more The Basel III Accord tightens capital adequacy requirements for banks by increasing the minimum Tier 1 regulatory capital threshold from 4 to 6 percent. It also emphasizes the need to improve timeliness of loan loss provisions. Using a sample of European banks, we examine the impact of this regulation on banks’ discretionary loan loss provisioning behavior. Underscoring banks’ increased incentives to report higher capital ratios, we observe a post-Basel III increase in banks’ use of discretionary loan loss provisions (DLLPs) for capital management purposes and a corresponding reduction in the use of these provisions for income smoothing purposes. Moreover, we find that the timeliness of loan loss provisions has improved following Basel III. We also find that the post-Basel III increase in capital management behavior is greater for banks that do not face conflicting incentives when using DLLPs to improve Tier 1 versus total capital ratio. In contrast, the improvement in loan loss provisioning timeliness is greater for banks that are less likely to engage in capital management due to these conflicting incentives. Our findings suggest that Basel III has significantly altered banks’ discretionary loan loss provisioning behavior.

Journal of Finance and Accounting, 2020

Prior research suggests there are significant differences in how investors perceive the reliabili... more Prior research suggests there are significant differences in how investors perceive the reliability of fair values. An unaddressed question in this stream of research is whether cross-country differences in institutional factors can mediate differences in reliability for the fair value hierarchy measurements. We contribute to the research on fair value accounting by examining the impact of institutional factors toward the perceived reliability of fair value measurements in an international context. Based on an international sample of banks across twenty different countries, we find that the probability of crash risk is lower among countries with better financial development infrastructure, greater level of trust, tighter security regulations and higher level of disclosure requirements. These results apply to Level 1 assets but not to Level 2 and Level 3 assets. We also document that these cross-country factors improve the trading volume of our sample banks. Our study provides early evidence suggesting that fair value measurements across the fair value hierarchy are impacted by a country's institutional background and financial development as well as the extent of its securities regulation and disclosure level. Our study suggests that there are ongoing concerns toward opaque fair values which are not fully eliminated by institutional differences. In addition, these differences matter in influencing investor willingness to trade in these stocks.

Finance and Market

We examine the determinants that influence managers’ decision as to whether a lease is structured... more We examine the determinants that influence managers’ decision as to whether a lease is structured as a financing lease or an operating lease. Specifically, we find that firms with higher marginal tax rates, lower credit ratings, and more severe agency problems are more likely to use both operating leases and financing leases. However, tax considerations and debt capacity have little effect on which of the two types of lease is chosen. More importantly, we find that differences in kinds of agency problemsare reflected in the choice of the type of lease. Our study provides a better understanding of the extent of risks and benefits associated with the use of leased assetsand contributes to the discussion of impending revisions to lease accounting rules by standard-setting bodies.

A new perspective on post‐earnings‐announcement‐drift: Using a relative drift measure

Journal of Business Finance & Accounting

Valuation Implications of FAS 159 Reported Gains and Losses from Fair Value Accounting for Liabilities

SSRN Electronic Journal

An Examination of the Statistical Significance and Economic Relevance of Profitability and Earnings Forecasts from Models and Analysts

Contemporary Accounting Research

China Journal of Accounting Research, 2016

The Effect of Statement of Financial Accounting Standards No. 157 Fair Value Measurements on Analysts’ Information Environment

한국회계학회 학술연구발표회 논문집, Jun 30, 2011

Theory and practice of the proposed conceptual framework: Evidence from the field

Advances in Accounting, 2016

The effect of Statement of Financial Accounting Standards No. 157 Fair Value Measurements on analysts’ information environment

Journal of Accounting and Public Policy, 2016

SSRN Electronic Journal, 2000

We address the demand for model-based earnings forecasts by proposing a cross-sectional model whi... more We address the demand for model-based earnings forecasts by proposing a cross-sectional model which incorporates three salient ideas. First, firm performance converges to expected levels over time; second, amounts from current financial statements are robust predictors of future performance; and third, ordinary least squares (OLS) estimation is unreliable in samples including extreme values. Accordingly, we estimate a cross-sectional earnings forecasting model based on least absolute deviations analysis (LAD), and include profitability drivers derived from financial statements as predictors. In terms of statistical significance, we find that these forecasts are more accurate than forecasts from three extant prediction models and consensus analysts' forecasts. In terms of economic implications, we find that forecasts from our model have greater predictive ability for future abnormal returns than consensus analysts' forecasts. Overall, our results are important because they document the usefulness of a crosssectional earnings forecasting model for a broad range of diverse firms, including those with little or no analyst coverage.