Accounting diversity and firm valuation

King, Raymond D.; Langli, John Christian

doi:10.1016/s0020-7063(98)90012-7

Cited by 84 publications

(70 citation statements)

References 16 publications

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“…In order to collect as much data as possible, we have not defined any truncation rule. The market value has been collected with respect to the third month after fiscal year end (as Cormier et al, 2009;Kanagaretnam et al, 2009;Oswald, 2008;Van der Meulen et al, 2007;Hellström, 2006;King and Langli, 1998).…”

Section: Data and Samplementioning

confidence: 99%

Assessing the value relevance of total comprehensive income under IFRS: an empirical evidence from European stock exchanges

Devalle

Magarini

2012

IJAAPE

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This paper compares the value relevance of the net income and the total comprehensive income reported under IFRSs. The total comprehensive income represents a key measure of the overall company performance, and it is extremely topical after the revision of the IAS 1. The paper aims at verifying whether the total comprehensive income is more value relevant than the net income. To this purpose, accounting and market data regarding companies listed on the UK, French, German, Spanish and Italian stock exchanges have been collected for the years 2005-2007. Valuation models have been used to assess the differences in value relevance by using total comprehensive income or net income. Findings show that total comprehensive income has not resulted in an unquestionable increase in value relevance compared with net income. This research contributes to defining the relevance of the total comprehensive income and to the international debate about which overall company performance should be reported in the IFRS financial statement.

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Section: Data and Samplementioning

confidence: 99%

Assessing the value relevance of total comprehensive income under IFRS: an empirical evidence from European stock exchanges

Devalle

Magarini

2012

IJAAPE

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“…The total amount of financial statements analysed was 580, but a number of firms have been excluded because of the missing values. The market value has been collected with respect to the 3rd month after fiscal year end (as Cormier et al, 2009;Kanagaretnam et al, 2009;Oswald, 2008;Van der Meulen et al, 2007;Hellström, 2006;King and Langli, 1998).…”

Section: Data and Samplementioning

confidence: 99%

Value relevance of accounting data and financial crisis in Europe: an empirical analysis

Devalle

2012

ijafr

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This paper aims at verifying the relationship between book value and market value for a four years period (2006)(2007)(2008)(2009) in Europe, under IFRS. In particular, I used value relevance approach to measure whether net income or comprehensive income is more useful to understand the relationship between market data and financial data. Moreover, the paper analyzes the impact of financial crisis on the value relevance of accounting data. The examination period runs from a pre-crisis period (2006)(2007) to an in-crisis period (2008)(2009). Results shows that comprehensive income is more value relevant than net income. Furthermore, the financial crisis has a positive impact on value relevance.

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“…The abnormal earnings model in particular is superior compared to other models when accounting distortion is less severe than forecasting errors (Francis et al, 2000) which require a clean surplus accounting where all assets and liabilities changes pass through the income statement (Ohlson, 1995). 2 Studies show that the clean surplus assumption is regularly violated and significant deviations between different accounting standards can be observed (Harris et al, 1994, King et al, 1998, Isidro, O'Hanlon and Young, 2006) and as discussed in King et al (1998) the German accounting standards have less violations of clean surplus than other accounting standards. 3 Altogether, more accurate the terminal value can be predicted the better the free cash flow and dividend discount models will perform while the abnormal earnings model benefit from accounting accuracy and from few violation of clean surplus accounting.…”

Section: Resultsmentioning

confidence: 99%

“…Since the book value is systematically undervalued under German accounting rules the abnormal earnings model estimates are also downward biased. However, a conflict between the findings of King et al (1998), who examined that HGB accounting standards has less clean surplus violations than other accounting standards, and Francis et al (2000), who reports that the abnormal earnings model perform well when clean surplus, can be identified. Additionally, some other patterns can be identified: first, the increase in volatility of the valuation bias during the years might also be related with the changes in the accounting standards; second, the observed trend of a constantly increasing value estimates to market price ratio shows that the aftermath of the financial crisis from 2007-2009 are priced in these estimations; third, the decrease in the corporate tax rate from 1990 to 2010 has a decline effect on corporate tax shield on the one side but also the cash flows and after tax profits increases on the other side.…”

mentioning

confidence: 95%

How Good are Equity Valuation Models in Predicting Stock Prices?

Hukelmann¹,

Mateus

2012

SSRN Journal

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This paper aims to test the accuracy of three well-known equity valuation models for the period 1990 to 2006. This was done to a sample of German listed firms which diverge from the US market in accounting standards, market maturity and corporate governance culture (bank-based in contrast to the market-based US regime) as well as different market movements and trends which influence main input factors and estimations (e.g. market risk premium, inflation rate and GDP growth rate). To the best of our knowledge this is the first paper to address this issue for a sample of listed firms from the largest bank-based European economy. Using different accuracy measures such as absolute prediction error (average, median and central tendency) as well as multiple regression analysis the results show that dividend discount and abnormal earnings models tend to provide better accuracy than the free cash flow approach. Additionally, we find evidence of the importance in German accounting standards in the less accurate performance of the abnormal earnings model compared to previous studies due to the conservative accounting and the influence of hidden reserves. Finally, we did not find any significant valuation differences regarding the alternative values used for growth and discount rates.

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Accounting diversity and firm valuation

Cited by 84 publications

References 16 publications

Assessing the value relevance of total comprehensive income under IFRS: an empirical evidence from European stock exchanges

Assessing the value relevance of total comprehensive income under IFRS: an empirical evidence from European stock exchanges

Value relevance of accounting data and financial crisis in Europe: an empirical analysis

How Good are Equity Valuation Models in Predicting Stock Prices?

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