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Publication date: 28 February 2022

Mark 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.

Article
Publication date: 1 April 2006

Yuan Ding and Herve Stolowy

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…

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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.

Details

Review of Accounting and Finance, vol. 5 no. 2
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 11 November 2019

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.

Details

Asian Review of Accounting, vol. 28 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 8 January 2020

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.

Details

Accounting Research Journal, vol. 33 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 11 February 2019

Chee Kwong Lau and Li Li Wong

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).

Details

Journal of Property Investment & Finance, vol. 37 no. 2
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 5 February 2020

Juha Mäki

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.

Details

Journal of European Real Estate Research , vol. 13 no. 1
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 25 September 2009

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.

Details

Managerial Finance, vol. 35 no. 11
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 8 February 2016

Ramzi Benkraiem

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.

Details

Journal of Applied Accounting Research, vol. 17 no. 1
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 3 June 2019

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.

Details

Pacific Accounting Review, vol. 31 no. 3
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 11 September 2023

Feng Tang

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.

Details

Journal of Accounting in Emerging Economies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2042-1168

Keywords

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