SFAS No. 52 establishes a new system for reporting the results of foreign operations by excluding translation gains and losses that relate to autonomous subsidiaries. Substantial evidence indicates SFAS No. 52 saved multinationals' resources by reducing the need for accounting hedging. Insofar as SFAS No. 52 generates both operational and reporting benefits, we test the association between market returns and both operational savings and agency variables. Empirical results indicate that measures of operational savings are positively associated with increases in the market returns but do not support the agency-based hypotheses. The current evidence on SFAS No. 52 taken together with Salatka (1989) on SFAS No. 8 mandates caution in concluding that agency considerations are driving the capital market's reaction to new information about foreign operations.
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