The Value Relevance of German Accounting Measures: An Empirical Analysis

Harris, Trevor S.; Lang, Mark H.; Peter, Henry

doi:10.2307/2491281

Cited by 405 publications

(243 citation statements)

References 8 publications

Supporting

Mentioning

214

Contrasting

Unclassified

Order By: Relevance

“…Consequently, we expect this decrease in earnings informativeness to have no effect on firms' cost of debt. Indeed, Harris et al (1994) and Guenther and Young (2000) note that European firms generally and German firms in particular, which tend to have higher book-tax conformity than U.S. firms, typically rely more on debt financing, although they do not perform any empirical tests on this relation. We expect equity investors, however, to demand a higher cost of equity capital.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Book-Tax Conformity and Capital Structure

2014

View full text Add to dashboard Cite

We examine the effect of increased book-tax conformity on corporate capital structure. Prior studies document a decrease in the informativeness of accounting earnings for equity markets resulting from higher book-tax conformity. We argue that the decrease in earnings informativeness impacts equity holders more than debt holders because of the differences in payoff structures between debt and equity investments such that increases in book-tax conformity lead to increases in firms' reliance on debt capital. We exploit a natural experiment in the U.S. and find that firms facing an increase in required book-tax conformity increase leverage relative to other firms. We also provide evidence of an increase in the cost of equity (but not of debt) capital for firms facing an increase in required book-tax conformity relative to control firms and that these increases in cost of equity capital are positively associated with an increase in leverage. Our findings are consistent with firms substituting away from equity and towards more debt in the presence of higher book-tax conformity.

show abstract

Section: Hypothesis Developmentmentioning

confidence: 99%

Book-Tax Conformity and Capital Structure

2014

View full text Add to dashboard Cite

show abstract

“…For example, Harris et al (1994) document higher value relevance for consolidated financial information over nonconsolidated information in Germany. Further, Goncharov et al (2009) exploit the dual reporting system (single and consolidated ) in Germany and find that consolidated income exhibits higher predictability of earnings and cash flow, lower degree of earnings management, higher value relevance and higher timeliness than unconsolidated income.…”

Section: Regulation In Consolidated Financial Statementsmentioning

confidence: 99%

“…To provide relevant information, the parent and the subsidiary should be included in the same reporting entity to reflect the economic substance of the underlying transactions. Extant studies also support that consolidated financial information is more value-relevant than unconsolidated information (Abad, et al, 2000;Goncharov et al, 2009;Harris et al, 1994;Niskanen et al, 1998). Relevant studies are scant, however, with respect to how boundaries of consolidation affect incentives to manage earnings via related party transactions.…”

Section: Introductionmentioning

confidence: 99%

“…Extant literature mostly focuses on the comparison of information relevance between parent and consolidated financial statements and finds that consolidated financial information is more value relevant in Germany (Harris et al, 1994;Goncharov et al, 2009), Spain (Abad et al, 2000), and Finland (Niskanen et al, 1998). Exploiting the natural experiment of regulation change in consolidated financial statements in Taiwan, Hsu et al (2012) further find that consolidated financial information under control-based approach is more value-relevant than ownership-based approach.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The Change of Consolidation Rules and Its Impact on Earnings Management

Yang¹,

Li²,

Lin³

et al. 2017

Proceedings of the 6th Business &Amp; Management Conference, Geneva

View full text Add to dashboard Cite

Boundaries of consolidated reporting entities vary between International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP). Based on the rules-oriented conceptual framework, U.S. GAAP adopts ownership-based consolidation approach (ARB 51), while IFRS adopts control-based approach that is more principle-oriented (IAS 27). Exploiting a unique setting which took place in Taiwan that switched from U.S. GAAP to IFRS in

show abstract

“…Other studies to be mentioned include: Foster (1977); Board and Walker (1990); Strong and Walker (1993); Harris, Lang, and Moller (1994) ;Collins, Pincus, and Xie (1999); Francis and Schipper (1999) ;Dhaliwal, Subramanyam, and Trezevant (1999);Sarlo Neto (2004); Costa and Lopes (2007) ;Lopes, Sant' Anna, and Costa (2007); Galdi and Lopes (2008) ;Bastos, Nakamura, David, andRotta (2009), Malacrida (2009) and Zanini, Cañibano, and Zani (2010).…”

Section: Value Relevance: the Study Of The Relevance Of Accounting Inmentioning

confidence: 99%

Analysis of the Relevance of Information Content of the Value Added Statement in the Brazilian Capital Markets

Machado

Macedo

Machado

2015

Rev. contab. finanç.

View full text Add to dashboard Cite

The usefulness of financial statements depends, fundamentally, on the degree of relevance of the information they disclose to users. Thus, studies that measure the relevance of accounting information to the users of financial statements are of some importance. One line of research within this subject is in ascertaining the relevance and importance of accounting information for the capital markets: if a particular item of accounting information is minimally reflected in the price of a share, it is because this information has relevance, at least at a certain level of significance, for investors and analysts of the capital markets. This present study aims to analyze the relevance, in the Brazilian capital markets, of the information content of the Value Added Statement (or VAS) -referred to in Brazil as the Demonstração do Valor Adicionado, or DVA. It analyzed the ratio between stock price and Wealth created per share (WCPS), using linear regressions, for the period 2005-2011, for non-financial listed companies included in Melhores & Maiores ('Biggest & Best'), an annual listing published by Exame Magazine in Brazil. As a secondary objective, this article seeks to establish whether WCPS represents a better indication of a company's result than Net profit per share (in this study, referred to as NPPS). The empirical evidence that was found supports the concept that the VAS has relevant information content, because it shows a capacity to explain a variation in the share price of the companies studied. Additionally, the relationship between WCPS and the stock price was shown to be significant, even after the inclusion of the control variables Stockholders' equity per share (which we abbreviate in this study to SEPS) and NPPS. Finally, the evidence found indicates that the market reacts more to WCPS (Wealth created per share) than to NPPS. Thus, the results obtained give some indication that, for the Brazilian capital markets, WCPS may be a better proxy concept for referring to a company's result than NPPS.

show abstract

The Value Relevance of German Accounting Measures: An Empirical Analysis

Cited by 405 publications

References 8 publications

Book-Tax Conformity and Capital Structure

Book-Tax Conformity and Capital Structure

The Change of Consolidation Rules and Its Impact on Earnings Management

Analysis of the Relevance of Information Content of the Value Added Statement in the Brazilian Capital Markets

Contact Info

Product

Resources

About