WWW.DISSERTATION.XLIBX.INFO
FREE ELECTRONIC LIBRARY - Dissertations, online materials
 
<< HOME
CONTACTS



Pages:     | 1 |   ...   | 30 | 31 || 33 | 34 |   ...   | 38 |

«Leif Atle Beisland University of Agder Dissertation submitted to the Department of Accounting, Auditing and Law at the Norwegian School of Economics ...»

-- [ Page 32 ] --

Lev, B., Li, S., & Sougiannis, T. (2005). Accounting Estimates: Pervasive, Yet of Questionable Usefulness. Working Paper.

Lev, B., & Sougiannis, T. (1996). The capitalization, amortization, and value-relevance of R&D. Journal of Accounting & Economics, 21(1), 107-138.

Lev, B., & Zarowin, P. (1999). The Boundaries of Financial Reporting and How to Extend Them. Journal of Accounting Research, 37(2), 353-385.

Liu, J., & Thomas, J. (2000). Stock Returns and Accounting Earnings. Journal of Accounting Research, 38(1), 71-101.

Maddala, G. S. (2001). Introduction to Econometrics - Third Edition. John Wiley and Sons Ltd..

Monahan, S. J. (2005). Conservatism, Growth and the Role of Accounting Numbers in the Fundamental Analysis Process. Review of Accounting Studies, 10(2-3), 227-260.

Ohlson, J. A., & Penman, S. H. (1992). Disaggregated Accounting Data as Explanatory Variables for Returns. Journal of Accounting, Auditing & Finance, 7(4), 553-573.

Penman, S. H., & Xiao-Jun, Z. (2002). Accounting Conservatism, the Quality of Earnings, and Stock Returns. Accounting Review, 77(2), 237.

- 225 Pope, P. F. (2005). Discussion--Accruals, Accounting-Based Valuation Models, and the Prediction of Equity Values. Journal of Accounting, Auditing & Finance, 20(4), 347Ramakrishnan, R. T. S., & Thomas, J. K. (1998). Valuation of Permanent, Transitory, and Price-Irrelevant Components of Reported Earnings. Journal of Accounting, Auditing and Finance, 13(3), 301-336.

Rayburn, J. (1986). The Association of Operating Cash Flow and Accruals with Security Returns. Journal of Accounting Research, 24(3), 112-133.

Rosenberg, B., Reid, K., & Lanstein, R. (1985). Persuasive evidence of market inefficiency.

Journal of Portfolio Management, 11(3), 9-16.

Stark, A. W. (1997). Linear Information Dynamics, Dividend Irrelevance, Corporate Valuation and the Clean Surplus Relationship. Accounting & Business Research, 27(3).

Stattman, D. (1980). Book Values and Stock Returns. The Chicago MBA: A Journal of Selected Papers.

Thomas, W. B. (1999). A test of the market's mispricing of domestic and foreign earnings.

Journal of Accounting & Economics, 28(3), 243-267.

–  –  –

Table description Table 7 lists the number and percentage share of companies reporting respectively negative earnings, extraordinary items, intangible assets, and impairment from 1994 to 2004.

Table 8: Detailed Accruals Panel A: Value Relevance of Positive and Negative Earnings

–  –  –

Table description Table 8 describes the value relevance of detailed earnings components for a sample of Norwegian firms from 1992 to 2004. It summarises the regression coefficients (Coefficient), White-adjusted t-values (t-statistic), total explanatory power (adj. R2), number of observations (n) and mean variance inflation factor (Mean VIF) for positive and negative earnings sub-samples, respectively. Data is analysed using the following regression

specifications:

The standard specification is applied in panel A and the leftmost analysis of panel B:

RETi,t = β 0 + β1CFi,t + β 2 ∆CFi,t + β 3 ∆INVi,t + β 4 ∆∆INVi,t + β5 ∆REC i,t + β 6 ∆∆RECi,t + β 7 ∆PAYi,t + β8 ∆∆PAYi,t + β9 DEPR i,t + β10 ∆DEPR i,t + β11IMPi,t + β12 ∆IMPi,t + β13 ∆DTi,t + β14 ∆∆DTi,t + ε i,t

Dummy variable for negative earnings is applied in the rightmost analysis of panel B:

–  –  –

where RETi,t is the stock return for company i in year t, CF is cash flow from operations, INV is inventory, REC is receivables, PAY is payables, DEPR is depreciation, IMP is impairment and DT is deferred taxes. D is a dummy variable equal to 1 when earnings are negative, 0 otherwise. ∆ denotes yearly change in the variables.

The accounting variables are scaled by the market value of equity on 30 December in year t-1. Coefficients in bold denote a statistical significance at a 5% level using a two sided test.

Table 9: VIF per Regression Coefficient

–  –  –

Table description Table 9 lists the regression coefficients’ individual variance inflation factor in the following regressions (see

Panel C of table 4):

Standard specification:

RETi,t = β 0 + β1CFi,t + β 2 ∆CFi, t + β 3 ∆WC i,t + β 4 ∆∆WC i,t + β 5 DEPi,t + β 6 ∆DEPi,t + β 7 ∆DTi,t + β 8 ∆∆DTi, t + ε i,t

–  –  –

where RETi,t is the stock return for company i in year t, CF is cash flow from operations, WC is working capital, DEP is depreciation and impairment, and DT is deferred taxes. D is a dummy variable equal to 1 when earnings

–  –  –

Table 10 presents descriptive statistics for the control variables (see Tables 5 and 6) company size (SIZE = log of market value of equity), intangible asset intensity (INTANG = sum of intangible assets at time t divided by the market value of equity at the beginning of year t), the book-to-market ratio (BM = book value of equity divided by market value of equity at time t), interest rate (INTEREST = the expected return on 5-year risk free government bonds), stock price volatility (VOL = the standard deviation of monthly returns on Oslo Stock Exchange) and net extraordinary items (EXTRA = total extraordinary items at time t divided by the market value of equity at the beginning of year t). It summarises the mean, first quarter, median, third quarter, standard deviation, and number of observations for the positive and the negative earnings sample, respectively.





–  –  –

Table description Table 11 describes the value relevance of earnings for a sample of Norwegian firms from 1992 to 2004 when control variables are included in the regression analyses (see Table 5). It summarises the regression coefficients (Coefficient), White-adjusted t-values (t-statistic), total explanatory power (adj. R2) and number of observations (n) for the positive and negative earnings samples, respectively. Data is analysed using 3 different earnings aggregation levels.

–  –  –

where RETi,t is the stock return for company i in year t, EARN is earnings before extraordinary items, CF is cash flow from operations, ACC is total accruals, WC is working capital, DEP is depreciation and impairment, and DT is deferred taxes. ∆ denotes yearly change in the variables. The accounting variables are scaled by the market value of equity on 30 December in year t-1. CVi is control variable i. The control variables are company size (SIZE = log of market value of equity), intangible asset intensity (INTANG = sum intangible assets at time t divided by the market value of equity at the beginning of year t), the book-to-market ratio (BM = book value of equity divided by market value of equity at time t), interest rate (INTEREST = the expected return on 5-year risk free government bonds), stock price volatility (VOL = the standard deviation of monthly returns on Oslo Stock Exchange) and net extraordinary items (EXTRA = total extraordinary items at time t divided by the market value of equity at the beginning of year t).

–  –  –

Table description Table 12 describes the value relevance of earnings for a sample of Norwegian firms from 1992 to 2004 when control variables are included in the regression analyses (see Table 6). It summarises the regression coefficients (Coefficient), White-adjusted t-values (t-statistic), total explanatory power (adj. R2) and number of observations (n) for the total sample. Data is analysed using 3 different earnings aggregation levels.

Panel A presents the results of the following regressions:

–  –  –

where RETi,t is the stock return for company i in year t, EARN is earnings before extraordinary items, CF is cash flow from operations, ACC is total accruals, WC is working capital, DEP is depreciation and impairment, and DT is deferred taxes. D is a dummy variable equal to 1 when earnings are negative, 0 otherwise. ∆ denotes yearly change in the variables. The accounting variables are scaled by the market value of equity on 30 December in year t-1. CVi is control variable i. The control variables are company size (SIZE = log of market value of equity), intangible asset intensity (INTANG = sum intangible assets at time t divided by the market value of equity at the beginning of year t), the book-to-market ratio (BM = book value of equity divided by market value of equity at time t), interest rate (INTEREST = the expected return on 5-year risk free government bonds), stock price volatility (VOL = the standard deviation of monthly returns on Oslo Stock Exchange) and net extraordinary items (EXTRA = total extraordinary items at time t divided by the market value of equity at the beginning of year t).

–  –  –

Abstract

Firms listed on European stock exchanges are required to report according to International Financial Reporting Standards, IFRS, in their consolidated financial statements as of 2005. We use a sample of 741 firm-year observations from the Oslo Stock Exchange in Norway over the years 2003-2006 to examine whether this shift in reporting regime from local GAAP to IFRS has changed how investors respond to accounting information. After controlling for economic drivers of response coefficients, we find that while the association between stock prices and book values has increased after the transition to IFRS, the earnings response coefficients have been reduced. The increase in investors’ response to book values is attributed to more recognition of intangible assets and more measurement at fair value. The lower response to earnings is found to be driven mainly by nonrecurring items. Thus, fair value revaluations appear to be detrimental to the value relevance of earnings.

–  –  –

International Financial Reporting Standards, IFRS, from 2005 and onwards in their consolidated financial accounts.1 We use this mandatory transition to IFRS to study the effect on how investors respond to this new reporting regime, relative to the previously used regime – in our case Norwegian Generally Accepted Accounting Principles, NGAAP. According to Gjerde, Knivsflå and Sættem (2008), there are two main differences between IFRS and NGAAP;

more recognition of intangible assets and more measurement at fair values for financial instruments and investment properties, as well as for certain operating assets such as biological assets.

We form testable hypotheses on how these two major differences in reporting between IFRS and NGAAP will influence investors’ response to earnings and book values, based on previous empirical findings about the effect of increased recognition of intangible assets (e.g. Lev and Sougiannis, 1996) and measurement at fair value (e.g. Hann, Heflin and Subramanayam, 2007). We expect the stock price’s response coefficient to the corresponding book value to increase, though the hypothesis is formulated and tested two-sided. The response coefficient of the stock price to earnings per share is also expected to be different after the adoption of IFRS, as there is a potential trade-off between at least two effects. More recognition of intangible assets may increase the coefficient, while more measurement at fair value may make earnings more transitory and hence make the price less responsive to earnings. After controlling for other differences between the IFRS and NGAAP samples, such as differences in risk, loss reporting, intangible asset intensity and non-recurrence of earnings, we find evidence that the balance sheet becomes more important under IFRS whereas the value relevance of the The European Economic Area is comprised of the members of the European Union plus Norway, Iceland and Lichtenstein.

–  –  –

balance sheet more value relevant, while fair value revaluations seem to create transitory ‘noise’ in the income statement; compare Penman (2007).

This paper is unique in several aspects. We are the first to provide long term evidence on the effects of adopting IFRS in Norway. Gjerde, Knivsflå and Sættem (2008) only focus on one year, 2004, in which they analyze the NGAAP figures with their restated IFRS counterparts in

2005. We analyze the effect over the four year period from 2003 to 2006, with considerably more observations. Secondly, we use a methodological technique to study the structural break between NGAAP and IFRS involving controlled moderation effects on the response coefficients of both earnings and book values. This means that we avoid potential criticism by comparing the explanatory power in terms of the adjusted R2 in two different samples; see e.g.

Easton and Sommers (2003) and Gu (2007). Finally, we are able to control for a large set of other value relevance drivers not purely related to differences in accounting regime, such as the degree of loss reporting, the intangible asset intensity and the non-recurrence of earnings.

Our first hypothesis is that the stock price responds differently to the book value of equity under IFRS than under NGAAP. There is empirical evidence suggesting that more recognition and ‘better’ measurement increases the response coefficient of the balance sheet relative to the case where it is based on expensing as incurred and past transactional cost; see e.g. Lev and Sougiannis (1996) and Aboody and Lev (1998) in relation to intangible asset recognition versus expensing as incurred, and e.g. Barth, Beaver and Landsman (1996), Khurana and Kim (2003) and Henn, Heflin and Subramanyam (2007) in relation to measurement at fair value versus transactional cost.

–  –  –



Pages:     | 1 |   ...   | 30 | 31 || 33 | 34 |   ...   | 38 |


Similar works:

«Hoover Classics : Flat Tax hcflat ch3 Mp_79 rev0 page 79 3. The Postcard Tax Return tax forms really can fit on postcards. A cleanly designed tax system takes only a few elementary calculations, in contrast to the hopeless complexity of today’s income taxes. In this chapter, we present a complete plan for a whole new tax system that puts a low tax rate on a comprehensive definition of income. Because its base is broad, the astonishingly low 19 percent tax rate raises the same revenue as...»

«Munich Personal RePEc Archive Belgium’s Expansionist History between 1870 and 1930: Imperialism and the Globalisation of Belgian Business Jan-Frederik Abbeloos Ghent University, Cliohres.net 2008 Online at http://mpra.ub.uni-muenchen.de/11295/ MPRA Paper No. 11295, posted 30. October 2008 02:50 UTC Jan‐Frederik Abbeloos, “Belgium’s Expansionist History between 1870 and 1930: Imperialism and the ...»

«NBER WORKING PAPER SERIES HARD EVIDENCE ON SOFT SKILLS James J. Heckman Tim D. Kautz Working Paper 18121 http://www.nber.org/papers/w18121 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 June 2012 This paper was presented as the Adam Smith Lecture at the Annual Meeting of the European Association of Labour Economists held in Cyprus, September 2011. This research was supported in part by the University of Chicago, A New Science of Virtues: A Project of the...»

«FOREWORD In 2015 the Parish Council and a few volunteers carried out a survey, the results of which called for more social and leisure activities in the Parish. We have made a start by putting together this brochure of the many local activities. Please keep it for future reference. Then there is a big get together for the residents of Hodnet, Marchamley, Peplow and Wollerton, the Right Royal Party, on Saturday June 11th on Hodnet Recreation Ground. You will find a programme inside of what's...»

«European Learning Partnership Project “family business” Marketing for small businesses 5 About this tutorial What are techniques of marketing for SME? Eight guerrilla marketing tips for small businesses Associated marketing trends Reverse graffiti Viral marketing, viral advertising, or marketing buzz Provocative marketing Radical marketing Permission marketing Presence marketing Grassroots marketing Forehead Advertising Buzz marketing Undercover Marketing Wait marketing Conclusion...»

«The Global Journal of Finance and Economics, Vol. 9, No. 2, (2012) : 75-84 FACTORS INFLUENCING IMPLEMENTATION OF DEVELOPMENT PROJECTS: AN EMPIRICAL STUDY OF SELECTED AFRICAN COUNTRIES Millicent Addo* and Khashruzzaman Choudhury** ABSTRACT Over the last forty years, implementation research has widely covered the philosophy, strategies, and methods of implementation. While several factors have been identified as influencing implementation, outlining the relative importance of explanatory factors...»

«Afro Eurasian Studies, Vol. 2, Issues 1&2, Spring & Fall 2013, 5-14 Reflecting on the Trajectory of Islamic Finance: From Mit Ghamr to the Globalisation of Islamic Finance Mehmet Asutay, Ahmet Faruk Aysan and Cenk C. Karahan Every civilisation has, historically, developed their own political, economic, and social order through which the formation of their society has been defined. The Muslims, from the 7th century onwards, aimed to create a system of an Islamic order by developing their own...»

«Syllabus: Wine Economics ECO 440.671, Summer 2015 Johns Hopkins University MS Program in Applied Economics Dr. Stephen Chaikind schaikind@jhu.edu Course Purpose and Objectives: The purpose of this course is to provide knowledge, skill and practice in applying economic concepts to the newly emerging field of wine economics. The course will provide students with both a theoretical grounding in wine economics as well as practical hands-on and interactive experience in the discipline. Understanding...»

«Design, social innovation and sustainable ways of living Creative communities and diffused social enterprise in the transition towards a sustainable network society. August-September 2007 DRAFT Ezio Manzini DIS-Indaco, Politecnico di Milano 1 INDEX Introduction 3 1. Sustainability. Systemic change and social learning process. 5 BOX 1.1 Sustainable development BOX 1.2 Environmental and social sustainability BOX 1.3 Factor 10 2. Ways of living. Product-based and context-based well-being. 15 BOX...»

«IDRC Lib. RECENT DEVELOPMENTS IN DEMAND FOR MONEY ISSUES: SURVEY OF THEORY & EVIDENCE WITH REFERENCE TO ARAB COUNTRIES Jamil Tahir Working Paper 9530 This report is presented as received by IDRC from project recipient(s). It has not been subjected to peer review or other review processes. This work is used with the permission of Economic Research Forum. © 1995, Economic Research Forum. Please address correspondence to: Dr. Jamil Tahir, Senior Economist, Arab Planning Institute, P.O.Box 5834,...»

«Workshop Report Climate and Clean Air Coalition Paris, 10 – 11 September, 2015 (CCAC) Finance Workshop Report Helping Cities to create bankable projects for municipal solid waste management 1 TABLE OF CONTENTS 2 Background and Introduction 3 Summary of expert presentations UNITED NATIONS ENVIRONMENT PROGRAMME (UNEP) ALEXANDER KOCH: The Green Climate Fund Introduction CAPITAL MARKETS AND AFFORDABLE HOUSING INSTITUTE JEREMY GORELICK: Helping Cities To Finance Climate-Sensitive Improvements In...»

«Manure to Energy Initiative: Financing Inventory for Delaware, Maryland, Pennsylvania, Virginia, and West Virginia Prepared for the National Fish and Wildlife Foundation Prepared by the University of Maryland Environmental Finance Center (EFC) May 30, 2012 2012 Page |2 This document was prepared by: Environmental Finance Center The Environmental Finance Center (EFC) is located at the National Center for Smart Growth Research and Education at the University of Maryland in College Park. The EFC...»





 
<<  HOME   |    CONTACTS
2016 www.dissertation.xlibx.info - Dissertations, online materials

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.