An Event Study and Financial Analysis of FASB Accounting Standards, leases, No. 842
This study examines the financial impact of the Financial Accounting Board (FASB) FASB changes in accounting for leases rules on companies’ stock prices and financial ratios. The event study documents that there was no significant negative stock price reaction for some individual companies as well as a portfolio of companies. In addition, the results indicate that the market reaction varies cross sectionally with the increase in balance sheet leverage ratios. The findings in this paper have important implications for companies with billions of dollars of operating leases because the market may react to the increase in a company’s liabilities, accounting ratios, and the change in its capital structure and risks when the official implementation is set for 2018.