The market pricing of negative special items through time: an unintended consequence of regulation change?

  • Thomas J. Lopez
  • Craig A. SisnerosEmail author
  • Trevor Sorensen
Original Research


Prior research concludes that the implications of negative special items (NSIs) for future earnings are more fully reflected than earnings before NSIs. Our evidence suggests that US regulatory changes resulted in dramatic increases (decreases) in NSI reporting frequency (magnitude). We find that the advantage in pricing NSIs relative to other components of earnings disappears for the average firm post-regulation and for high frequency NSI reporters regardless of time period. Our evidence suggests that regulations governing the financial reporting of NSIs resulted in unintended consequences by impairing the ability of market participants to understand the future earnings implications of these items.


Special items Earnings components Restructuring Goodwill impairment Special item reporting frequency Financial regulation Unintended consequence 

JEL Classification

G30 G14 G34 M41 



We thank Steve Lin, Ovee Barua, Terry Shevlin, Jenny Tucker Wu, Partha Mohanram, Kelvin Liu and workshop participants at Florida International University, Oklahoma State University, Shanghai University of Finance and Economics, the 2012 AAA Annual Meeting, especially discussant Jim Naughton, and the 2013 McMaster University Accounting Symposium, for comments on early drafts of this manuscript.

Data availability

Data are available from public sources identified in the paper.


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  • Thomas J. Lopez
    • 1
  • Craig A. Sisneros
    • 2
    Email author
  • Trevor Sorensen
    • 3
  1. 1.Culverhouse School of Accountancy, Culverhouse College of CommerceUniversity of AlabamaTuscaloosaUSA
  2. 2.School of Accounting, Spears School of BusinessOklahoma State UniversityStillwaterUSA
  3. 3.College of Business and EconomicsWest Virginia UniversityMorgantownUSA

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