This dissertation evaluates the effects of a new accounting standard, Statement of Financial Accounting Standards No. 113 (SFAS No. 113), "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts." SFAS No. 113 is one of the first standards issued by FASB that requires firms to record and disclose risk management activities. SFAS No. 113 targets the insurance industry and their key risk management activity, reinsurance and established criteria for classifying a contract as reinsurance and prescribing more detailed accounting and reporting standards for reinsurance.;The first study reports descriptive data on certain accounting measures to determine if there exist potential economic consequences to insurers from the mandatory changes in reinsurance accounting. Specifically, it examines how changes in reinsurance reporting impact the earnings volatility and leverage measures used by management, investors and regulators in evaluating insurers' management of operating, financing, and regulatory risks. An increase in earnings volatility is expected to be larger for smaller insurers.;The second study examines the incremental value-relevance to investors from better reporting of reinsurance transactions. It specifically examines whether the impact of SFAS No. 113 on summary measures results in increased explanatory power of accounting measures for stock price. It also provides a unique opportunity to evaluate the presentation of the information and whether the presentation is relevant to investors, in comparison to the information available through regulatory reports prior to SFAS No. 113.;Results for the studies are based on data from 83 publicly-held property-liability insurance holding companies and their insurance subsidiaries. Findings from the first study support the hypothesis that earnings volatility increased with the increase most significant for smaller insurers. Results from the leverage tests are mixed. Leverage has increased but the association to insurer size in the post-period is not as predicted.;Findings from the second study support the hypotheses that the new measurement and disclosure requirements for reinsurance reporting are incrementally value-relevant to the prior requirements and support the hypothesis that the change in reporting of reinsurance activity is incrementally value-relevant to the reinsurance information available through regulatory reports prior to SFAS No. 113.
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