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1 – 10 of over 13000Mark DeSantis, Matthew McCarter and Abel Winn
The authors use laboratory experiments to test two self-assessment tax mechanisms for facilitating land assembly. One mechanism is incentive compatible with a complex tax…
Abstract
The authors use laboratory experiments to test two self-assessment tax mechanisms for facilitating land assembly. One mechanism is incentive compatible with a complex tax function, while the other uses a flat tax rate to mitigate implementation concerns. Sellers publicly declare a price for their land. Overstating its true value is penalized by using the declared price to assess a property tax; understating its value is penalized by allowing developers to buy the property at the declared price. The authors find that both mechanisms increase the rate of land assembly and gains from trade relative to a control in which sellers’ price declarations have no effect on their taxes. However, these effects are statistically insignificant or transitory. The assembly rates in our self-assessment treatments are markedly higher than those of prior experimental studies in which the buyer faces bargaining frictions, such as costly delay or capital constraints.
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This paper aims to investigate the changes in the properties of accounting income published by French listed companies during the 1990s. It also analyzes the impact of certain…
Abstract
Purpose
This paper aims to investigate the changes in the properties of accounting income published by French listed companies during the 1990s. It also analyzes the impact of certain corporate characteristics such as size, international financing, and audit firm, on such changes.
Design/methodology/approach
Multivariate regression is used.
Findings
In French companies, good news has a delayed impact on earnings, as accountants only allow the effect of such news to be recognized gradually in the earnings measure. Conversely, bad news is reflected rapidly in earnings. The results confirm a general upward trend in the degree of conservatism of accounting earnings over the period as a whole. However, except for firm size, none of the corporate characteristics examined can predict a company's accounting earnings properties.
Research limitations/implications
In future studies, it will be interesting to develop and test other possible corporate and/or institutional factors relating to accounting earnings properties.
Practical implications
The paper provides an insight analysis on the evolution of institutional environment in France and its impact on accounting.
Originality/value
First study on properties of accounting income in France.
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Imran Haider, Nigar Sultana, Harjinder Singh and Yeut Hong Tham
The purpose of this paper is to assess whether there is an association between CEO age and analysts forecast properties (particularly forecast accuracy and bias/optimism). CEOs…
Abstract
Purpose
The purpose of this paper is to assess whether there is an association between CEO age and analysts forecast properties (particularly forecast accuracy and bias/optimism). CEOs, having the central role in managing firms, can significantly influence the financial and non-financial decisions in an organisation. Furthermore, having been identified as key culprits in past major accounting scandals, it is also important to identify the CEO characteristics that affect financial reporting decisions.
Design/methodology/approach
This study adopts the upper echelon theory on the relationship between CEO age and analysts forecast properties. The authors use a sample of 2,730 Australian firm-year observations for the period 2004–2013 drawn from IBES, Connect 4 and SIRCA databases.
Findings
The authors find that analyst forecast accuracy increases and bias (optimism) reduces with the CEO age. The authors conclude that earnings and related information provided to analysts improves with the CEO age, which increases the forecast accuracy and reduces bias (optimism). Additional results suggest that the positive (negative) effect of CEO age on forecast accuracy (bias) remains until the CEOs reach the age of their retirement age (65 years). The results remain consistent with a number of sensitivity tests and provide implication for stakeholders such as firms, analysts, auditors, financial statements users and regulators.
Practical implications
The authors demonstrate that the relationship between CEO age and analyst forecast properties is not linear but is, in fact, curvilinear substantiating concerns that CEOs that are much younger or much older do not help increase the quality of the information environment. Consequently, firms hiring CEOs in the right age bracket also benefit by having higher-quality information environment leading possibly to reduce costs such as those relating to debt and/or equity ultimately increasing firm value.
Originality/value
Empirical studies on the association between CEO age and analysts earnings properties in Australia are scarce and this paper contributes to the determinants of the analysts forecast accuracy and bias (optimism) and the CEO age literature.
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Kamran Ahmed, Muhammad Nurul Houqe, John Hillier and Steven Crockett
The purpose of this paper is to determine the properties of analysts’ cash flows from operations (CFO) forecast generated for Australian listed firms as a productive activity…
Abstract
Purpose
The purpose of this paper is to determine the properties of analysts’ cash flows from operations (CFO) forecast generated for Australian listed firms as a productive activity, within the wider processes of financial disclosure in Australia.
Design/methodology/approach
Two categories of criteria are adopted: first, basic predictive statistical performance relative to a benchmark model and earnings forecasts; and second, relevance for equity pricing, as indicated by the market reaction to cash flow or forecast error reactions. The final sample comprised 2,138 observations between 2001 and 2016 and several regression models are estimated to determine the relative performance and market reaction.
Findings
Analysts’ consensus cash flow forecasts demonstrate poor predictive performance relative to earnings forecasts. Cash flow forecasts are typically naïve extensions of earnings forecasts. Furthermore, cash flow forecasts appear to be of minimal use for equity market participants in complementing earnings forecasts’ role in informing firms’ equity pricing.
Practical implications
While analysts’ earnings forecasts are useful for making predictions, the role of analysts’ cash flow forecasts in capital market functional efficiency appears quite limited.
Originality/value
This study is one of few that examines comparative usefulness of analysts’ earnings and cash flow forecasts and their predictive power using the Australian setting. Additionally, it enriches the sparse international literature on such forecasts.
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The purpose of this paper is to answer the fundamental question about why the shares of property developers are traded at market discounts by focusing on property developers from…
Abstract
Purpose
The purpose of this paper is to answer the fundamental question about why the shares of property developers are traded at market discounts by focusing on property developers from Hong Kong, Malaysia and Singapore.
Design/methodology/approach
It measures market discount using market-to-book ratio (MTB) and specifies the relations between MTB and the hypothetical determining factors (revenue recognition policy, investment property measurement policy, related party (RP) transaction disclosures and economic rent) in the presence of relevant control variables.
Findings
This study finds that aggressive revenue recognition and investment property measurement policies increase market discounts, but that RP transactions generally contribute positively to reduce the market discounts of property developer shares. Specifically, RP transactions are value-enhancing only if property developers adopt a conservative revenue recognition policy, because markets sensibly see RP transactions that are part of an aggressive revenue recognition policy as earnings management for tunnelling by controlling shareholders, and hence react with discounts. It is also observed that when property developers generate insufficient profit to cover their cost of equity, this generally leads to their shares being traded at market discounts. However, an aggressive revenue recognition policy can reduce market discount if early recognition contributes positively to economic rent.
Practical implications
This study provides valuable evidence of the economic consequences (market discounts) of accounting choices on recognition and measurement, and the disclosure of accounting information. This is crucial to managers of property developers in managing their firm values when exercising accounting discretion.
Originality/value
This study provides empirical evidence on market discounts as they relate to property developers, which has been limited (past studies focus on property investment companies and real estate investment trusts).
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This paper aims to examine the connection between appraisals of investment properties and earnings properties in companies from two perspectives: what kinds of companies employ…
Abstract
Purpose
This paper aims to examine the connection between appraisals of investment properties and earnings properties in companies from two perspectives: what kinds of companies employ the most reputable appraisers and how appraisers produce estimations.
Design/methodology/approach
The research uses annual reports of European Union (EU) publicly traded real estate companies and examines the period 2007-2016.
Findings
The contribution of this study lies in establishing that some indicators and features of real estate companies affect the choice of appraiser and also in illustrating differences in the results of property valuations. In short, smaller companies with weaker performance are less willing to use external valuation, and external appraisers produce more conservative estimations for investment properties.
Practical implications
The research produces beneficial information for investors and other stakeholders interested in the real estate industry.
Originality/value
This is the first novel study to examine the link between appraisals of investment properties and earnings properties in companies in detail.
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Nikolaos Eriotis, Costandinos Siriopoulos, Dimitrios Vasiliou and Vasileios Zisis
Prior evidence suggests the existence of asymmetric timeliness in the reporting of good and bad news of firms that trade in the Athens Stock Exchange. The purpose of this paper is…
Abstract
Purpose
Prior evidence suggests the existence of asymmetric timeliness in the reporting of good and bad news of firms that trade in the Athens Stock Exchange. The purpose of this paper is to explore whether these results are consistent with inferences related to persistence property of earnings for firms that trade in the Athens Stock Exchange.
Design/methodology/approach
The research design employs both level regression specification and change regression specification and it is based on pool cross‐sectional regressions. Empirical results after classifying observations are reported based on both the sign of prior period and current period firms' return, while a number of sensitivity tests are employed.
Findings
According to prior evidence, bad news is recorded more timely than good news but in an unbiased and non‐conservative way. This implies that earnings shocks of firms with bad news should present persistence. Results from an ex‐ante perspective verify these arguments while results from an ex‐post perspective do not.
Originality/value
In contrast to other studies that report results that, in bad news periods, firms' earnings tend to present lower persistence than firms' earnings in good news periods, because managers conservatively report bad news, this paper focuses on a sample of firms that seems to report bad news in a timely way.
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This paper starts from the observation that small businesses in France report a significant fraction of their net income in the form of non-core earnings. Consequently, the…
Abstract
Purpose
This paper starts from the observation that small businesses in France report a significant fraction of their net income in the form of non-core earnings. Consequently, the purpose of this paper is to examine the persistence and informativeness of both core and non-core earnings of small businesses listed on the Euronext Paris market.
Design/methodology/approach
Panel regressions estimated with heteroskedasticity robust standard errors are used to investigate the relationships between earnings components, future performance and stock market valuation of small businesses.
Findings
The findings show that core and non-core earnings of the current year (t), contrary to those of the previous year (t−1), make it possible to predict the performance of the next year (t+1). However, only the persistence of current core earnings is valued by the stock market.
Research limitations/implications
The study puts forward an anomaly of market efficiency. Thus, it shows that investors in the French stock market do not appropriately price a part of the available financial information (i.e. non-core earnings) that may contribute to a better assessment of the future performance of listed small businesses.
Practical implications
The persistence of non-core earnings is certainly less important than that of core elements but able to help investors appraise the future performance of listed small businesses. Hence, it represents useful financial information for investors.
Originality/value
This paper contributes to the existing literature by investigating the relationships between earnings, future performance and stock market valuation of listed SMEs, especially. Thus, the findings of this research allow a better understanding of earnings components properties (i.e. persistence) and their implication on the stock market valuation (i.e. informativeness) of listed SMEs. Given the observed specificities of earnings for this category of firms, these findings may be of particular interest to both researchers and investors.
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Beibei Yan, Walter Aerts and James Thewissen
This paper aims to investigate the informativeness of rhetorical impression management patterns of CEO letters and examines whether these rhetorical features affect financial…
Abstract
Purpose
This paper aims to investigate the informativeness of rhetorical impression management patterns of CEO letters and examines whether these rhetorical features affect financial analysts’ forecasting behaviour.
Design/methodology/approach
The authors use textual analysis on a sample of 526 CEO letters of US firms and apply factor analysis on individual linguistic style measures to identify co-occurrence patterns of style features.
Findings
The authors identify three holistic style patterns (assertive acclaiming, cautious plausibility-based framing and logic-based rationalizing) and find that assertive rhetorical feature in CEO letters is negatively related with the dispersion of financial analysts’ earnings forecasts and positively associated with earnings forecast accuracy. CEOs’ use of a rationalizing rhetorical pattern tends to decrease the dispersion of financial analysts’ earnings, whereas a cautious plausibility-based rhetorical position is only marginally instrumental in getting more accurate earnings predictions.
Practical implications
Whilst impression management communication is often theorized as manipulative and void of real information content, the findings suggest that impression management serves both self-presentation and information-sharing purposes.
Originality/value
This paper elaborates on the co-occurrence of style characteristics in management communication and is a first attempt to validate the external ramifications of holistic style profiles of corporate narratives by focusing on an economic target audience.
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Following the adoption of International Financial Reporting Standards (IFRS), firms are required to recognize gains or losses from investment property revaluation in the income…
Abstract
Purpose
Following the adoption of International Financial Reporting Standards (IFRS), firms are required to recognize gains or losses from investment property revaluation in the income statement, instead of equity in the balance sheet. This results in both a “materiality effect” (as auditors set a higher materiality level and require lower audit efforts) and a “cushion effect” (as revaluation gains serve as a cushion and reduce earnings manipulation incentives). Utilizing this unique setting, this study investigates whether the use of fair value measurement for investment property affects audit pricing before and after IFRS convergence in the Hong Kong real estate industry.
Design/methodology/approach
Using a sample of 78 real estate companies listed on the Hong Kong Stock Exchange in the pre-IFRS period (2001–2004) and the post-IFRS period (2005–2008), this study employs multivariate regression analyses to test the research hypotheses with respect to the association between investment property revaluation and audit fees and the role of corporate governance structures in the context of family control.
Findings
The empirical results suggest that audit fees decrease with revaluation gains or losses from investment property revaluation after IFRS convergence, but not before. Furthermore, the negative association is stronger in companies controlled by founders, with proportionally more independent directors on the board and with a smaller board size. This is consistent with the moderating effect of corporate governance.
Originality/value
The findings shed more light on the consequences of fair value accounting for non-financial assets and are of interest to regulators for assessing the benefits of the wide use of fair value measurement under IFRS in emerging markets, especially where the corporate ownership structure is typically controlled by founding families. This study also provides recommendations for the audit community to fully consider the impact of asset revaluation on audit procedures and audit pricing.
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