The Stock Price Impact of Mandated Accounting Charges on Rate-Regulated Firms

This study seeks to determine ifmore highly leveraged rate-regulated firms are positively affectedby accounting standards that increase recognized expenses. Itfinds a positive relation between leverage and market reactionsto SFAS 106 for rate-regulated firms. Further, results indicatethat this positive relation is an increasing function of thelevel of financial leverage and the extent to which the regulatoryclimate is favorable.