IDEAS home Printed from https://ideas.repec.org/a/taf/hbhfxx/v25y2024i4p449-463.html
   My bibliography  Save this article

Did the Recognition of Operating Leases Cause a Decline in Equity Valuations?

Author

Listed:
  • Jonathan A. Milian
  • E. Jin Lee

Abstract

We examine whether investors display a lack of attention by not incorporating relevant public information into equity valuations. Beginning in 2019, ASC 842 requires the recognition of operating leases, which were previously only disclosed in the financial statement footnotes. This change in accounting standard results in firms with significant operating leases recognizing a considerable increase in debt. We find that firms with significant operating leases, on average, earned negative stock returns around the initial recognition of their operating leases. We find that the negative reaction to operating lease recognition does not vary with firm-level proxies for investor attention, which suggests a pervasive lack of attention to operating lease disclosures prior to ASC 842. Our results provide new evidence consistent with investors suffering from limited attention and equity prices reflecting a lack of fundamental analysis.

Suggested Citation

  • Jonathan A. Milian & E. Jin Lee, 2024. "Did the Recognition of Operating Leases Cause a Decline in Equity Valuations?," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 25(4), pages 449-463, October.
    • Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:4:p:449-463
    DOI: 10.1080/15427560.2023.2207021
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/15427560.2023.2207021
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/15427560.2023.2207021?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:hbhfxx:v:25:y:2024:i:4:p:449-463. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/hbhf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.