No abstract

<p class="MsoBlockText" style="margin: 0in 0.6in 0pt 0.5in;"><span style="font-style: normal; font-size: 10pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;">Unlike prior research, we investigate the incremental explanatory power of both auditor qualified opinions and auditor changes beyond the information conveyed by traditional financial statement ratios in predicting bankruptcy. We find that qualified auditor opinion and auditor changes are both important in predicting impending bankruptcy and that auditor changes convey important information not reflected in auditor qualified opinions alone.<span style="mso-spacerun: yes;">&nbsp; </span>In fact, we find compelling evidence that auditor changes provide incremental explanatory power in predicting impending firm failure beyond what is conveyed by auditor qualified opinions and traditional financial statement ratios considered jointly.<span style="mso-spacerun: yes;">&nbsp; </span>Although the existing relevant literature provides no empirical evidence in this regard to our knowledge, this result is intuitive as one motivation for clients to change audit firms is to seek less conservative professional auditors as a strategic response to manifestation of the financial statement effects of bankruptcy.</span></span></p>

<p class="MsoBodyText3" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">This research investigates the comparative impact of country specific degree of IFRS implementation upon the accuracy and bias of West European and East European firms equity securities analysts earnings forecasts for 29 European countries 12 of which are characterized as being East European.<span style="mso-spacerun: yes;">&nbsp; </span>We utilize measures of equity securities analysts earnings forecast accuracy and bias in making comparisons of the impact of country specific degree of IFRS implementation upon the statistical properties of earnings forecasts for firms having domiciles in East European and West European countries.<span style="mso-spacerun: yes;">&nbsp; </span>Our results indicate that (1) analysts earnings forecast accuracy and earning forecast bias decreases in the sense that their association with magnitudes earnings changes decreases in relation with country specific degree of implementation of IFRS and (2) the degree of reduction in analysts earnings forecast accuracy and bias is statistically more pronounced for East European firms than for West European Firms.<span style="mso-spacerun: yes;">&nbsp; </span>Our results persist after controlling for cross-listing of ADRs on US securities exchanges.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>Bases upon this evidence we conclude that the benefits of implementation of IFRS is marginally greater for East European firms that for West European firms.</span></span></p>

No abstract

This study uses an equity valuation model to investigate the extent to which SFAS No. 52 unrealized foreign currency translation gains and losses are reflected in levels of equity security prices. Equity security price is used as the dependent variable in our selected model. Book value of equity (adjusted for the cumulative translation gain or loss), earnings, and cumulative translation gains and losses are used as independent variables. Our results indicate that, generally, translation gains and losses are valued, but losses have a greater impact than gains and the value seems to change over time in setting the levels of equity share prices of USbased MNCs. On a pooled basis, the results are clearly statistically significant, although the statistical significance of the results appears to vary with the annual time period examined. Our results are consistent with the SFAS No. 52 intention that these gains and losses be treated as unrealized as the net exposure is considered long-term in nature for foreign currency functional currency subsidiaries. Our results appear consistent with extant literature suggesting that unrealized foreign currency translation gains and losses are directly valuedalthough not dollar for dollar -in a manner similar to earnings (i.e., unrealized gains are associated with positive equity returns and unrealized losses are associated with negative equity returns).