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Article
Publication date: 5 November 2018

Louis Banks, Allan Hodgson and Mark Russell

This paper aims to test whether a change in the reporting location of income, and other comprehensive income (OCI) components, in a statement of comprehensive income…

Abstract

Purpose

This paper aims to test whether a change in the reporting location of income, and other comprehensive income (OCI) components, in a statement of comprehensive income (SoCI) under International Financial Reporting Standards affects their value-relevance and use by financial analysts.

Design/methodology/approach

The study tests the associations between CI, OCI, share returns and financial analyst forecast revisions.

Findings

Results show that comprehensive income is less value-relevant than net income, regardless of reporting location. Changing the reporting location of OCI components to the SoCI does not provide incremental improvement for financial analysts or stock prices. Finally, the paper finds that analysts use OCI components to revise forecasts.

Originality/value

The paper addresses the question of which OCI components should be reported, and the importance of reporting location. The paper extends the examination of OCI components to financial analysts as expert financial report users.

Details

Accounting Research Journal, vol. 31 no. 4
Type: Research Article
ISSN: 1030-9616

Keywords

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Article
Publication date: 1 February 2000

Allan Hodgson and Peta Stevenson‐Clarke

The fundamental relationship between accounting variables and firm valuation is a recurring theme in capital market research. This paper investigates this relationship…

Abstract

The fundamental relationship between accounting variables and firm valuation is a recurring theme in capital market research. This paper investigates this relationship within a balance sheet context and highlights the importance of controlling for relevant economic factors. We do this by conditioning explanatory power on the firm's relative financial leverage position, after controlling for cashflows and firm size, and using an arctan regression model to take account of temporary components in cash and earnings flows. Using data for 743 firm‐years for Australian Stock Exchange listed stocks, we find that for firms which are ‘above optimal leverage’: (i) earnings contain a greater level of transitory items, particularly when firm size is small; and (ii) cashflows provide higher incremental information. Our results are consistent with investors perceiving earnings as progressively less informative as the probability of failure increases, and the likelihood of earnings manipulation for the purpose of reducing proximity to debt covenants increases.

Details

Pacific Accounting Review, vol. 12 no. 2
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 1 July 2005

Peta Stevenson‐Clarke and Allan Hodgson

This paper estimates the value added by Big 8/6/5 auditors after controlling for the permanent and non‐permanent impact of earnings and cash flows using linear and…

Abstract

This paper estimates the value added by Big 8/6/5 auditors after controlling for the permanent and non‐permanent impact of earnings and cash flows using linear and nonlinear (arctan) regression models. The linear model shows significant value added for industrial firms that utilise Big 8/6/5 auditors; while an arctan model shows that large auditors value‐add by attesting to the permanence of earnings for large firms. We demonstrate that refinements to the audit research can be made by using response coefficients to filter out the different timing components inherent in earnings and cash flows.

Details

Accounting Research Journal, vol. 18 no. 1
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 1 June 2006

Nabil N.Z. Gindy, Bülent Cerit and Allan Hodgson

For high technology companies, the successful acquisition and management of technology to enable the development and manufacture of innovative products is a key factor in…

Abstract

Purpose

For high technology companies, the successful acquisition and management of technology to enable the development and manufacture of innovative products is a key factor in their competitiveness. Seeks to present an integrated technology road‐mapping methodology that enables management to define its technology requirements, taking account of financial and other issues, to assess proposed technology projects against these requirements and to create a balanced technology project portfolio.

Design/methodology/approach

The methodology consists of six steps or phases; the first three steps produce a set of technology requirements based on a company's business drivers, products and competitive position; the last three steps enable the creation and assessment of a portfolio of research and development projects.

Findings

Applications of the methodology in industry have demonstrated that the integrated nature of the process, from a derivation of technology requirements to investment decision making, improves the clarity and transparency of decision making. In particular, the linking of technology requirements assessment to portfolio generation makes it easier to justify the assignment of resources to technology assessment.

Practical implications

The methodology has been applied successfully in a high technology manufacturing environment. The formalized methodology ensures that assumptions and preferences have to be externalized and justified. In addition, the results of a road‐mapping or project assessment session can be re‐examined at a later date in order to ascertain the reasoning behind decisions taken.

Originality/value

An integrated road‐mapping methodology is presented which utilizes both financial and non‐financial (including intangible) factors to provide guidance and enable the objective selection and assessment of a portfolio of technology projects. This software‐supported methodology has been applied successfully in high technology manufacturing companies.

Details

Journal of Manufacturing Technology Management, vol. 17 no. 4
Type: Research Article
ISSN: 1741-038X

Keywords

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Article
Publication date: 10 July 2007

Mark Brimble and Allan Hodgson

This paper aims to examine the contemporary association between accounting information and a number of measures of systematic (beta) risk that incorporate dynamic market…

Abstract

Purpose

This paper aims to examine the contemporary association between accounting information and a number of measures of systematic (beta) risk that incorporate dynamic market features. The goal is to determine the fundamental accounting drivers of beta and to assess whether their explanatory variable power has changed or declined over time.

Design/methodology/approach

Beta estimates are calculated using adjustments for thin‐trading, central tendency, leverage, and time variance. Accounting risk variables are derived from theoretical foundations and prior empirical research, and classified as operating, financial or growth.

Findings

Results show a strong association between accounting variables (operating and growth) and systematic risk that is consistent over time, but with some industry and size differences and possible country effects. Accounting variables are able to capture dynamic risk shifts and generally are able to outperform naïve M‐GARCH and industry betas in predicting next year's systematic risk.

Practical implications

Internal management and external decision making enable the development of more efficient ex‐post risk measures, isolating actual risk determinants rather than just determining the level of risk, overcoming the problem that conventional ex‐post measures cannot be used for non‐listed entities, initial public offering firms, or those that do not have sufficient trading history, reduces the noise found in traditional risk estimates that rely on historical security returns, and the development of trading and valuation strategies.

Originality/value

This is the first paper that assesses the association between a range of dynamic risk measures and accounting variables and tests whether this long‐run association has changed over time.

Details

Managerial Finance, vol. 33 no. 8
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 29 July 2014

Tian Zhong, Robert Faff, Allan Hodgson and Lee J. Yao

– The purpose of this paper is to examine the impact of female board membership on the profitability of corporate insider purchases.

Abstract

Purpose

The purpose of this paper is to examine the impact of female board membership on the profitability of corporate insider purchases.

Design/methodology/approach

The authors use a classic event study approach. They measure abnormal returns around the insider purchase events, and analyze the cross-sectional variation of this market impact in terms of female board membership, controlling for a range of other factors.

Findings

The authors find a strong positive market reaction in the aggregated data, and after decomposing transactions according to gender, they find that the profitability of female directors is statistically indistinguishable from their male counterparts. Additionally, they find evidence that with more females sitting on the board, the profitability of the male directors decreases but the profitability of their female counterparts does not.

Originality/value

The authors’ findings suggest that having females on the board increases corporate governance of male directors. The results also suggest that female directors are no less inclined to exploit the asymmetric information advantage provided by board membership.

Details

International Journal of Accounting & Information Management, vol. 22 no. 3
Type: Research Article
ISSN: 1834-7649

Keywords

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Article
Publication date: 1 March 2011

Allan Hodgson, Suntharee Lhaopadchan and Sitapa Buakes

Prior research, in mainly Western economies, suggests the level of corporate governance is financially important. As an emerging economy case study, the purpose of this…

Abstract

Purpose

Prior research, in mainly Western economies, suggests the level of corporate governance is financially important. As an emerging economy case study, the purpose of this paper is to investigate whether the Thai Institute of Directors (IOD) corporate governance index provides investors with financial information about fundamental value and arbitrage portfolio decisions, and if/how information content changes over time.

Design/methodology/approach

Logistic regressions using 11 financially dependent variables and a “good governance” dummy variable, constructing zero‐cost buy‐sell portfolios, and Fama‐French cumulative average returns (CARs), over the period 2001‐2006.

Findings

The predicted significant relationships between a “good governance” categorization and financial proxies for firm performance; and zero‐cost portfolios that generate very high future monthly excess returns early in the study period, which are then dissipated by 2006, are found. These high returns were also associated with insignificant or inconsistent ten‐day CARs after the announcement of an improving (deteriorating) index category, but with a more rapid reaction in 2006.

Research limitations/implications

Results suggest that either (or in a combination): the Thai stock market had a slow learning adjustment to the governance index because of uncertainty as to information content; the IOD was incomplete and needed fine tuning and updating before full information impact was realized; and other time‐specific factors meant the IOD was of a lesser importance. One limitation is the data time period and the extension of the governance analysis to the global financial crisis years.

Practical implications

Governance information content in Thailand was not (initially) fully integrated into prices with substantial arbitrage returns available to astute investors. Continual re‐assessment and improvement of governance reporting should be an agenda requirement.

Originality/value

The paper forms an extension of governance studies into an Asian emerging economy, and determination of time‐varying information content and arbitrage opportunities.

Details

International Journal of Accounting & Information Management, vol. 19 no. 1
Type: Research Article
ISSN: 1834-7649

Keywords

Content available
Article
Publication date: 24 April 2007

Abstract

Details

Accounting, Auditing & Accountability Journal, vol. 20 no. 2
Type: Research Article
ISSN: 0951-3574

Content available
Article
Publication date: 22 July 2010

Abstract

Details

Accounting Research Journal, vol. 23 no. 1
Type: Research Article
ISSN: 1030-9616

Content available
Article
Publication date: 30 October 2007

Abstract

Details

Journal of Manufacturing Technology Management, vol. 18 no. 8
Type: Research Article
ISSN: 1741-038X

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