Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)


The purpose of this study is twofold. The first is to measure the impact of FASB 8 on multinational corporation (MNC) security prices. The second is to investigate the association between currency fluctuations and MNC security prices. Two types of empirical studies have been conducted to measure FASB 8's impact. The first were questionnaire studies measuring corporate managements' reactions toward the Statement. Their findings showed that corporate managers took certain costly decisions to alter the Statement's effects on reported earnings. The second type of study was conducted to measure the Statement's effect on security prices. Due to methodological problems, these market studies did not prove the Statement's negative impact. This study employed an improved methodology which controlled for certain characteristics that are unique to MNCs. Three factors were tested, (1) the location of MNCs foreign investments, (2) the magnitude of foreign investments, and (3) interaction of the location and magnitude factors. Based on these factors, six groups were formed: stable currency (SC), unstable currency (UC), high magnitude (HM), low magnitude (LM), (HM/UC), and (LM/SC). The methodology employed nonaffected MNCs as control groups. Residual analysis was conducted to measure the market's immediate reaction to the Statement. The market's response to corporate management reactions' to FASB 8 was tested by measuring the shifts in MNC systematic risks. The findings show that FASB 8 had significant negative impact on MNC security prices. Significant upward shifts in affected firms' systematic risks were found. Only location and interaction factors were found to provide information content to the market. The association between foreign currency fluctuations and MNC security prices was tested. The results show that the association varies from one firm to another. On the average, 2 percent of the variations in MNC security prices can be explained by the variations in exchange rates. The study has methodological, practical, and regulatory implications. Future research can benefit from the improved methodology used in this study. The findings may also assist market participants and corporate executives in various practical and investment decisions. The Financial Accounting Standards Board may benefit from these findings in setting future rules regarding MNCs.