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Value Relevance (value + relevance)
Selected AbstractsBank Relationships and the Value Relevance of the Income Statement: Evidence from Income-Statement ConservatismJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2007Wooseok ChoiArticle first published online: 10 MAY 200 Abstract:, This study examines the effects of a firm's debt financing decision on the informativeness of the income statement. This study specifically examines the association between a firm's bank dependence and the value relevance of the income statement by investigating the income-statement conservatism of firms with bank loans. Focusing on relatively small businesses, this study finds that income-statement conservatism, measured as timely loss recognition, is increasing in a firm's bank dependence. This study also finds that the value relevance of the income statement is increasing in a firm's bank dependence. The findings of this paper suggest that the usefulness of the income statement varies with a firm's bank dependence, indicating that the value relevance of the income statement is a function of a firm's debt financing decision. The findings further suggest that bank relationships affect the value relevance of the income statement through their influence on income-statement conservatism. [source] Value Relevance of IAS 27 (2003) Revision on Presentation of Non-Controlling Interest: Evidence From Hong KongJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2009Stella So This study investigates the value relevance of the IAS 27 Consolidated and Separate Financial Statements (2003) revision, which requires the presentation of non-controlling interest as components of equity and earnings. The investigation is carried out in the context of companies publicly listed in Hong Kong during 2004,2006 where IAS 27 (2003) is replaced by the local but word-for-word equivalent standard of HKAS 27 (2004). The results of this study provide strong evidence that the revision has significant value relevance in changing investors' perception about non-controlling interest, which is no longer perceived as liabilities. Investors have apparently not been confused by the revised presentation of non-controlling interest within equity and continue to associate company values only with the equity amount actually owned by the parent company's shareholders. The results of this study give support for the accounting regulator's first move towards the economic unit theory of consolidated financial statements. [source] Relative Value Relevance of Alternative Accounting Treatments for Unrealized Gains: Implications for the IASBJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 3 2006Stephen Owusu-Ansah We investigate the relative value relevance of the alternative accounting methods for unrealized gains on investment properties in New Zealand (NZ). Using both the Likelihood-ratio test and the F -test, we find that, while preferred by the NZ standard setter, recognition of unrealized gains in the income statement is not superior to (or significantly different from) recognition of unrealized gains in revaluation reserve in terms of their value relevance. The results are robust to the different research methods we used. Our results have implications for the International Accounting Standards Board in terms of: (i) recognizing changes in fair values of investment properties in the income statement under the revised IAS 40: Investment Property in countries where "realization" refers to net income available for distribution; (ii) its intent to issue a standard on a single statement of comprehensive income; and (iii) its initiative to reduce or eliminate alternative accounting treatments for similar fact situations in its standards. [source] Relative Value Relevance of R&D Reporting: An International ComparisonJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2002Ronald Zhao This study examines the relative value relevance of R&D reporting in France, Germany, the UK and the USA. France and the UK allow conditional capitalization of R&D costs, whereas Germany and the USA (except for the software industry) require the full and immediate expensing of all R&D costs. The relative value relevance of R&D reporting under different R&D accounting standards are compared while controlling for the reporting environment. Test results suggest that the level of R&D reporting has a significant effect on the association of equity price with accounting earnings and book value. The reporting of total R&D costs provides additional information to accounting earnings and book value in Germany and the USA (expensing countries), and the allocation of R&D costs between capitalization and expense further increases the value relevance of R&D reporting in France and the UK (capitalizing countries), including firms in the US software industry. [source] An Evaluation of the Value Relevance of Consolidated versus Unconsolidated Accounting Information: Evidence from Quoted Spanish FirmsJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 3 2000Cristina Abad In this paper we investigate the value-relevance of consolidated versus parent company accounting information. In particular we investigate the value relevance of the minority interest components of net total assets and earnings as currently reported and under the full entity approach to consolidated reporting. An Edwards-Bell-Ohlson valuation framework is used to generate results. By this means we cast light on the suitability of accounting regulation being developed based upon the entity or parent company theories of consolidation. We carry out the analysis in the Spanish context and the sample contains 474 observations of non-financial firms quoted in the Madrid Stock Exchange for the period 1991,97. The results from this analysis not only have domestic relevance but provide guidance of a more international nature relating to the impact of group definition, concepts of control and the most value relevant method of consolidated disclosure. The results show that, from a valuation perspective, consolidated information dominates non-consolidated, or parent company, information. However, neither the currently reported minority interest components of net total assets and earnings, nor their values under the full equity method of consolidation, are found to be value relevant. These results raise the question of whether group definitions based on the equity theory of consolidation are the most useful to investors. [source] Mandatory Adoption of IASB Standards: Value Relevance and Country-Specific FactorsAUSTRALIAN ACCOUNTING REVIEW, Issue 2 2009Ana Isabel Morais The objective of this study is to investigate if the value relevance of European-listed companies increased after the mandatory application of International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) and how the value relevance of accounting information prepared under IAS/IFRS is shaped by the specific factors of the country in which companies are domiciled. Results show that the value relevance of financial information during the period companies applied mandatory IAS/IFRS is higher than for the period during which they applied local accounting standards. We also found that countries where accounting and tax are clearly separated show more relevant accounting information. Finally, we found that companies from countries with more legal and public enforcement mechanisms disclose less relevant accounting information under IAS/IFRS. [source] Market's perception of deferred tax accrualsACCOUNTING & FINANCE, Issue 4 2009Cheryl Chang G14; M41 Abstract This study investigates the value relevance and incremental information content of deferred tax accruals reported under the ,income statement method' (AASB 1020 Accounting for Income Taxes) over the period 2001,2004. Our findings suggest that deferred tax accruals are viewed as assets and liabilities. We document a positive relation between recognized deferred tax assets and firm value using the levels model, while the results from the returns model suggest that deferred tax liabilities reflect future tax payments. The balance of unrecognized deferred tax assets provides a negative signal to the market about future profitability, particularly for companies from the materials and energy sectors and loss-makers. [source] On the intertemporal value relevance of conventional financial accounting in AustraliaACCOUNTING & FINANCE, Issue 4 2007Mark Brimble G10; G14; M41 Abstract This paper examines whether the relevance of conventional (earnings focused) accounting information for valuation has declined in Australia over a recent period of 28 years. Motivation is provided by the anecdotal concerns of financial analysts, accounting regulators, and a cluster of US centric academic research papers that conclude that the relevance of financial accounting (and earnings in particular) has declined over time. After controlling for nonlinearities and stock price inefficiencies, we find that the value relevance of core accounting earnings has not declined. A possible exception is found for small stocks. We also observe that net book values are relatively less important in Australia when compared to the USA. Our results are informative for investors who require feedback on valuation issues and the International Accounting Standards Board regulators in any further moves towards a balance sheet focus. [source] Market Valuation of Research and Development Spending under Canadian GAAP,ACCOUNTING PERSPECTIVES, Issue 1 2004ANTONELLO CALLIMACI ABSTRACT Section 3450 of the Canadian Institute of Chartered Accountants (CICA) Handbook requires Canadian firms to capitalize development costs that meet certain criteria and to expense those that relate to research. International Accounting Standard (IAS) No. 38 favours a similar approach. In the United States, Statement of Financial Accounting Standard (SFAS) No. 2 recommends the immediate expensing of all research and development (R&D) spending. The only exception is SFAS No. 86, which requires software development costs to be capitalized when a product successfully passes a technological feasibility test. Consequently, the Canadian financial disclosure regime provides a rich setting for testing the market valuation of capitalized R&D. Our primary research question asks whether capitalized R&D provides useful information to market participants investing in Canadian firms. We use price-level and return models to assess the value relevance of capitalized R&D disclosed in the financial statements under Canadian GAAP. In line with expectations, using a price-level model, we find that capitalized R&D and R&D expense as disclosed in the financial statements provide information that is value relevant to market participants. However, we find that R&D capitalized during the year helps explain returns while R&D expense does not. Thus we conclude that the application of section 3450 of the CICA Handbook produces value-relevant information. [source] Bank Relationships and the Value Relevance of the Income Statement: Evidence from Income-Statement ConservatismJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2007Wooseok ChoiArticle first published online: 10 MAY 200 Abstract:, This study examines the effects of a firm's debt financing decision on the informativeness of the income statement. This study specifically examines the association between a firm's bank dependence and the value relevance of the income statement by investigating the income-statement conservatism of firms with bank loans. Focusing on relatively small businesses, this study finds that income-statement conservatism, measured as timely loss recognition, is increasing in a firm's bank dependence. This study also finds that the value relevance of the income statement is increasing in a firm's bank dependence. The findings of this paper suggest that the usefulness of the income statement varies with a firm's bank dependence, indicating that the value relevance of the income statement is a function of a firm's debt financing decision. The findings further suggest that bank relationships affect the value relevance of the income statement through their influence on income-statement conservatism. [source] Across-sample Incomparability of R2s and Additional Evidence on Value Relevance Changes Over TimeJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2007Zhaoyang GuArticle first published online: 9 OCT 200 Abstract:, Given the increasing popularity of across-sample R2 comparisons in accounting research, this paper illustrates why the regression R2s are incomparable across samples and the general nature of this problem. The regression residual dispersion with proper control for scale is proposed as the alternative measure of explanatory power for across-sample comparisons. In market-on-accounting variable regressions, this measure can be conveniently interpreted as the degree of accounting-based pricing errors and be used as a measure of value relevance of accounting information. As an application, the issue of over-time value relevance changes is re-visited. In contrast to prior mixed findings based on the R2 measure, a decline of value relevance since the early 1970s is robustly detected using the alternative measure. [source] The Effect of Earnings Permanence, Growth, and Firm Size on the Usefulness of Cash Flows and Earnings in Explaining Security Returns: Empirical Evidence for the UKJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 5-6 2001Andreas Charitou This paper examines the relative information content of earnings and cash flows for security returns using a methodology incorporating contextual factors which may affect earnings and cash flow response coefficients. For our UK dataset, we provide evidence that the earnings coefficient is related to earnings permanence, growth and firm size and that the cash flow coefficient may be related to growth. Although our results emphasise the value relevance of earnings, they also suggest that both contemporaneous and prior period cash flow are positively related to security returns and that market-to-book and market value of equity have predictive power for returns. [source] Accounting for Employee Stock Options: What Can We Learn from the Market's Perceptions?JOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2010Emanuel Bagna The scope of this is paper is to provide new empirical evidence on the value relevance of employee stock options (ESOs) in Europe. We show, empirically, that the market participants when pricing a firm's equity place approximately the same valuation weights on the ESO -deferred compensation expense (the so called "ESO asset") and the compensation option liability (the so called "ESO liability"). Our empirical findings support the theoretical work of Ohlson and Penman who suggest that the deferred compensation expense be treated as a contra-liability. The second contribution of our work rests on the nature of the ESO expense. We show that the distinction between persistent and non-persistent ESO expenses is of critical importance for the market participants. Accordingly, an improved accounting disclosure should assist the investors in assessing the long-term goals of the ESO plans at the firm level. [source] Value Relevance of IAS 27 (2003) Revision on Presentation of Non-Controlling Interest: Evidence From Hong KongJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2009Stella So This study investigates the value relevance of the IAS 27 Consolidated and Separate Financial Statements (2003) revision, which requires the presentation of non-controlling interest as components of equity and earnings. The investigation is carried out in the context of companies publicly listed in Hong Kong during 2004,2006 where IAS 27 (2003) is replaced by the local but word-for-word equivalent standard of HKAS 27 (2004). The results of this study provide strong evidence that the revision has significant value relevance in changing investors' perception about non-controlling interest, which is no longer perceived as liabilities. Investors have apparently not been confused by the revised presentation of non-controlling interest within equity and continue to associate company values only with the equity amount actually owned by the parent company's shareholders. The results of this study give support for the accounting regulator's first move towards the economic unit theory of consolidated financial statements. [source] Relative Value Relevance of Alternative Accounting Treatments for Unrealized Gains: Implications for the IASBJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 3 2006Stephen Owusu-Ansah We investigate the relative value relevance of the alternative accounting methods for unrealized gains on investment properties in New Zealand (NZ). Using both the Likelihood-ratio test and the F -test, we find that, while preferred by the NZ standard setter, recognition of unrealized gains in the income statement is not superior to (or significantly different from) recognition of unrealized gains in revaluation reserve in terms of their value relevance. The results are robust to the different research methods we used. Our results have implications for the International Accounting Standards Board in terms of: (i) recognizing changes in fair values of investment properties in the income statement under the revised IAS 40: Investment Property in countries where "realization" refers to net income available for distribution; (ii) its intent to issue a standard on a single statement of comprehensive income; and (iii) its initiative to reduce or eliminate alternative accounting treatments for similar fact situations in its standards. [source] Relative Value Relevance of R&D Reporting: An International ComparisonJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2002Ronald Zhao This study examines the relative value relevance of R&D reporting in France, Germany, the UK and the USA. France and the UK allow conditional capitalization of R&D costs, whereas Germany and the USA (except for the software industry) require the full and immediate expensing of all R&D costs. The relative value relevance of R&D reporting under different R&D accounting standards are compared while controlling for the reporting environment. Test results suggest that the level of R&D reporting has a significant effect on the association of equity price with accounting earnings and book value. The reporting of total R&D costs provides additional information to accounting earnings and book value in Germany and the USA (expensing countries), and the allocation of R&D costs between capitalization and expense further increases the value relevance of R&D reporting in France and the UK (capitalizing countries), including firms in the US software industry. [source] Accounting-based Valuation of Polish Listed CompaniesJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2001Sylwia Gornik-Tomaszewski This study examines the value relevance of the new accounting system in Poland. Using a model derived from the Edwards-Bell-Ohlson valuation framework, the relation of current earnings and lagged book values with the stock prices of Polish listed companies is tested. The accounting data are derived from the financial statements prepared under The Act on Accounting of 1994, which assured a full compliance of the Polish accounting standards with the European Union directives. The results show that both current earnings and lagged book values are positively and significantly related to prices, and the magnitude of this relation is comparable to that reported in more advanced markets. Also, the incremental information content of lagged book value is greater than that of current earnings. [source] An Evaluation of the Value Relevance of Consolidated versus Unconsolidated Accounting Information: Evidence from Quoted Spanish FirmsJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 3 2000Cristina Abad In this paper we investigate the value-relevance of consolidated versus parent company accounting information. In particular we investigate the value relevance of the minority interest components of net total assets and earnings as currently reported and under the full entity approach to consolidated reporting. An Edwards-Bell-Ohlson valuation framework is used to generate results. By this means we cast light on the suitability of accounting regulation being developed based upon the entity or parent company theories of consolidation. We carry out the analysis in the Spanish context and the sample contains 474 observations of non-financial firms quoted in the Madrid Stock Exchange for the period 1991,97. The results from this analysis not only have domestic relevance but provide guidance of a more international nature relating to the impact of group definition, concepts of control and the most value relevant method of consolidated disclosure. The results show that, from a valuation perspective, consolidated information dominates non-consolidated, or parent company, information. However, neither the currently reported minority interest components of net total assets and earnings, nor their values under the full equity method of consolidation, are found to be value relevant. These results raise the question of whether group definitions based on the equity theory of consolidation are the most useful to investors. [source] The Value Relevance of Accounting Information during a Financial Crisis: Thailand and the 1997 Decline in the Value of the BahtJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2000Roger Graham This study addresses whether the financial turmoil surrounding the devaluation of the baht affected the value relevance of Thai accounting information. Our results suggest a decline in the value relevance of Thai book values and earnings following the devaluation. Prior to mid 1997 the Bank of Thailand pegged the value of the baht to a basket of currencies of which 80% was weighted to the US dollar. In response to pressure by currency speculators the bank abandoned its peg on July 2 1997 in favor of a managed float. The devaluation was followed by volatile exchange rates. The change in value relevance of accounting information after the devaluation may be attributable to the initial recognition of foreign exchange losses and the subsequent recognition of foreign exchange gains as exchange rates fell and then recovered. [source] Mandatory Adoption of IASB Standards: Value Relevance and Country-Specific FactorsAUSTRALIAN ACCOUNTING REVIEW, Issue 2 2009Ana Isabel Morais The objective of this study is to investigate if the value relevance of European-listed companies increased after the mandatory application of International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) and how the value relevance of accounting information prepared under IAS/IFRS is shaped by the specific factors of the country in which companies are domiciled. Results show that the value relevance of financial information during the period companies applied mandatory IAS/IFRS is higher than for the period during which they applied local accounting standards. We also found that countries where accounting and tax are clearly separated show more relevant accounting information. Finally, we found that companies from countries with more legal and public enforcement mechanisms disclose less relevant accounting information under IAS/IFRS. [source] | ||||||||||