In the November/December 1978 issue of Financial Analysts Journal, Professors Collins, Dent and O’Connor concluded that investors’ evaluation of full cost firms should have been adversely affected by both the APB and FASB proposals to eliminate full cost accounting in the oil and gas industry, and criticized earlier studies for failing to find this effect. The present author points out that, although virtually all the studies criticized by Collins, Dent and O’Connor found some adverse effect, they found no evidence that this effect was statistically significant. When the author, working with a collaborator, repeated the tests of Collins and Dent, he still found no significant effect.

He concedes that timing problems could have prevented earlier studies from detecting effects from both the APB’s and FASB’s proposals; uncertainty, rumor or investor anticipation may have caused significant adverse effects that fell outside the studies’ test periods, all of which surrounded actual issue dates. Tests to date have not been as decisive as one would like on this point.

Nevertheless, the author disagrees with Collins, Dent and O’Connor’s contention that, if in fact there is an adverse effect from such proposals, the resulting social cost will be severe. He points out that, so far, no studies have tested for such costs.