Kevin Ow Yong - Academia.edu (original) (raw)
Papers by Kevin Ow Yong
the Post-Earnings-Announcement-Drift
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.
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.
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...
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
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.
Journal of Business Finance & Accounting
Contemporary Accounting Research
China Journal of Accounting Research, 2016
한국회계학회 학술연구발표회 논문집, Jun 30, 2011
Advances in Accounting, 2016
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.
the Post-Earnings-Announcement-Drift
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.
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.
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...
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
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.
Journal of Business Finance & Accounting
Contemporary Accounting Research
China Journal of Accounting Research, 2016
한국회계학회 학술연구발표회 논문집, Jun 30, 2011
Advances in Accounting, 2016
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.