This paper examines security price reactions to the early adoption of FASB Statement of Financial Accounting Standards (SFAS) No. 52. Abnormal returns of a group of multinational enterprises that adopted the standard as of December 31, 1981, were compared with the abnormal returns of a control group of multinationals that postponed adoption. Differences between the two groups began two weeks prior to year-end and continued for five months. This raises questions about both market efficiency and investors' abilities to distinguish between economic changes and accounting changes.
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