Stephen Moehrle, Jennifer A. Reynolds-Moehrle, James S. Wallace
In this paper, we examine the relative information content of two cash earnings measures (earnings with amortization of intangibles added back and earnings before interest, taxes, depreciation, and amortization), one traditional accrual accounting earnings measure (earnings before extraordinary items), and one traditional cash flow measure (cash flow from operations). Our research is motivated by the increasing use of these cash earnings disclsoures and the perceived additional value they provide. Overall, we find results consistent with previous research that nothing beats accrual earnings in its ability to explain market-adjusted returns. In addition, and again consistent with prior literature, we find that as each measure moves further away from accrual accounting earnings and closer to cash flows, the explanatory power of the measure decreases. We do find, however, that the information content rank ordering of our four measures reverse when we perform our tests on only firms' loss-year observations, although there is no statistical significance between the measures in their relative information content. We further explore the loss-year sub-sample by examining cases in which the loss includes a large amortization charge. Within this sub-sample, the cash flow measures dominate. In fact, each of the two cash earnings measures provides significantly greater information content than does accounting earnings. The provides evidence that these disclosures may have value in certain settings.
{"title":"Are Cash Earnings Disclosures Valuable?","authors":"Stephen Moehrle, Jennifer A. Reynolds-Moehrle, James S. Wallace","doi":"10.2139/ssrn.229285","DOIUrl":"https://doi.org/10.2139/ssrn.229285","url":null,"abstract":"In this paper, we examine the relative information content of two cash earnings measures (earnings with amortization of intangibles added back and earnings before interest, taxes, depreciation, and amortization), one traditional accrual accounting earnings measure (earnings before extraordinary items), and one traditional cash flow measure (cash flow from operations). Our research is motivated by the increasing use of these cash earnings disclsoures and the perceived additional value they provide. Overall, we find results consistent with previous research that nothing beats accrual earnings in its ability to explain market-adjusted returns. In addition, and again consistent with prior literature, we find that as each measure moves further away from accrual accounting earnings and closer to cash flows, the explanatory power of the measure decreases. We do find, however, that the information content rank ordering of our four measures reverse when we perform our tests on only firms' loss-year observations, although there is no statistical significance between the measures in their relative information content. We further explore the loss-year sub-sample by examining cases in which the loss includes a large amortization charge. Within this sub-sample, the cash flow measures dominate. In fact, each of the two cash earnings measures provides significantly greater information content than does accounting earnings. The provides evidence that these disclosures may have value in certain settings.","PeriodicalId":180033,"journal":{"name":"Journal of Accounting Abstracts","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2000-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131426484","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines whether managers discretionary valuations of intangible assets are relevant despite contracting incentives to over-state them. We do so by examining the value relevance of brand assets recognized by 30 UK firms beginning in 1985. Our study adds to the literature on the value-relevance of intangible assets by examining valuations of managers who could be subject to contracting incentives, rather than of outside parties. We add to the evidence on managers? discretionary (re)valuations by explicitly partitioning the sample on measures of contracting incentives, and by examining a situation where contracting incentives are likely strong. Our results suggest that brand values recognized in financial statements are associated with values capitalized in stock prices, and with future net income, even for firms with the greatest contracting incentives firms affected by the London Stock Exchange (LSE) rule requiring shareholder approval for acquisitions/disposals, and high-leverage firms. These findings are robust to several sensitivity checks. We also find modest evidence that contracting incentives have an effect on value-relevance the coefficient relating brand assets to market values are higher for firms without any transactions that avoided the LSE rule.
{"title":"The Value Relevance of Brand Assets Recognized by UK Firms","authors":"Sanjay Kallapur, Sabrina Y. S. Kwan","doi":"10.2139/ssrn.207248","DOIUrl":"https://doi.org/10.2139/ssrn.207248","url":null,"abstract":"This study examines whether managers discretionary valuations of intangible assets are relevant despite contracting incentives to over-state them. We do so by examining the value relevance of brand assets recognized by 30 UK firms beginning in 1985. Our study adds to the literature on the value-relevance of intangible assets by examining valuations of managers who could be subject to contracting incentives, rather than of outside parties. We add to the evidence on managers? discretionary (re)valuations by explicitly partitioning the sample on measures of contracting incentives, and by examining a situation where contracting incentives are likely strong. Our results suggest that brand values recognized in financial statements are associated with values capitalized in stock prices, and with future net income, even for firms with the greatest contracting incentives firms affected by the London Stock Exchange (LSE) rule requiring shareholder approval for acquisitions/disposals, and high-leverage firms. These findings are robust to several sensitivity checks. We also find modest evidence that contracting incentives have an effect on value-relevance the coefficient relating brand assets to market values are higher for firms without any transactions that avoided the LSE rule.","PeriodicalId":180033,"journal":{"name":"Journal of Accounting Abstracts","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2000-03-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129430121","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper identifies problems related to RIV in an equity valuation context. Three problems are discussed. First, on a per share basis clean surplus will not generally hold if there are expected changes in shares outstanding; this aspect eliminates a necessary condition for the RIV-formula to be valid. Second, an all equity approach does not work if the firm plans to bring in "new" shareholders who derive a net benefit from their capital contributions. Third, GAAP violates clean surplus because some capital contributions are not accounted for in market value terms. As an alternative to RIV, the paper shows that it makes more economic/accounting sense to focus on expected eps, adjusted for dps, as a valuation attribute instead of current book value and expected residual earnings.
{"title":"Residual Income Valuation: The Problems","authors":"James A. Ohlson","doi":"10.2139/ssrn.218748","DOIUrl":"https://doi.org/10.2139/ssrn.218748","url":null,"abstract":"This paper identifies problems related to RIV in an equity valuation context. Three problems are discussed. First, on a per share basis clean surplus will not generally hold if there are expected changes in shares outstanding; this aspect eliminates a necessary condition for the RIV-formula to be valid. Second, an all equity approach does not work if the firm plans to bring in \"new\" shareholders who derive a net benefit from their capital contributions. Third, GAAP violates clean surplus because some capital contributions are not accounted for in market value terms. As an alternative to RIV, the paper shows that it makes more economic/accounting sense to focus on expected eps, adjusted for dps, as a valuation attribute instead of current book value and expected residual earnings.","PeriodicalId":180033,"journal":{"name":"Journal of Accounting Abstracts","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2000-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126227242","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Compounds are provided having the capability of binding therapeutically active substances to lipid containing bio-compatible particles, such as cells or viruses. These compounds include a bio-affecting moiety, comprising a therapeutically active substance, which is linked via a linking moiety to at least one hydrocarbon substituent selected so that the compounds is sufficiently non-polar to impart lipid binding capability to the compound. Thus, compounds of the invention are useful for site-selective delivery of therapeutic agents, and retention thereof at the selected site. Methods are provided for using various compounds of the invention in treatment of diseases or other pathological conditions. For example, methods are provided for treatment of: (1) post-angioplasty restenosis; (2) rheumatoid arthritis; (3) tumor cell proliferation, particularly tumor cells associated with ovarian cancer; and (4) psoriasis.
{"title":"Social Behaviors, Enforcement, and Compliance Dynamics","authors":"Jon S. Davis, Gary Hecht, Jon D. Perkins","doi":"10.2139/ssrn.209869","DOIUrl":"https://doi.org/10.2139/ssrn.209869","url":null,"abstract":"Compounds are provided having the capability of binding therapeutically active substances to lipid containing bio-compatible particles, such as cells or viruses. These compounds include a bio-affecting moiety, comprising a therapeutically active substance, which is linked via a linking moiety to at least one hydrocarbon substituent selected so that the compounds is sufficiently non-polar to impart lipid binding capability to the compound. Thus, compounds of the invention are useful for site-selective delivery of therapeutic agents, and retention thereof at the selected site. Methods are provided for using various compounds of the invention in treatment of diseases or other pathological conditions. For example, methods are provided for treatment of: (1) post-angioplasty restenosis; (2) rheumatoid arthritis; (3) tumor cell proliferation, particularly tumor cells associated with ovarian cancer; and (4) psoriasis.","PeriodicalId":180033,"journal":{"name":"Journal of Accounting Abstracts","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2000-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127802120","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The relative merits of schematic faces for the communication of multivariate information have been explored in a number of disciplines. Existing studies in the financial environment suggest that they may be superior to conventional methods in both their communications and decision-making qualities. This paper employs an innovative research design to demonstrate the relative usefulness of schematic faces in the failed/non-failed decision-making context compared to accounting statements and financial ratios. An optimum assignment of financial variables to facial characteristics is suggested, one which demonstrates the usefulness of schematic faces as a decision tool in the financial environment. Schematic faces are shown to be processed more quickly and with no loss of accuracy, compared to more traditional means of presenting financial information. Existing applications of schematic faces have been deficient in a number of areas. This study employs a complex research design involving multiple treatments to overcome the confounding problems of subject variability while also addressing the impact of differential priors and differential misclassification costs.
{"title":"Cartoon Graphics in the Communication of Accounting Information","authors":"Malcolm Smith, R. Taffler, L. White","doi":"10.2139/ssrn.219328","DOIUrl":"https://doi.org/10.2139/ssrn.219328","url":null,"abstract":"The relative merits of schematic faces for the communication of multivariate information have been explored in a number of disciplines. Existing studies in the financial environment suggest that they may be superior to conventional methods in both their communications and decision-making qualities. This paper employs an innovative research design to demonstrate the relative usefulness of schematic faces in the failed/non-failed decision-making context compared to accounting statements and financial ratios. An optimum assignment of financial variables to facial characteristics is suggested, one which demonstrates the usefulness of schematic faces as a decision tool in the financial environment. Schematic faces are shown to be processed more quickly and with no loss of accuracy, compared to more traditional means of presenting financial information. Existing applications of schematic faces have been deficient in a number of areas. This study employs a complex research design involving multiple treatments to overcome the confounding problems of subject variability while also addressing the impact of differential priors and differential misclassification costs.","PeriodicalId":180033,"journal":{"name":"Journal of Accounting Abstracts","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2000-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126321972","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper I use a principal-agent framework to explore the relation between the hierarchical structure of firms and the accounting information technologies available to them. I allow the principal to choose the number of layers in the firm, the number of agents in each layer, and the quantity and quality of information in the firm (subject to the available information technology). Alternative information technologies are characterized by their monitoring efficiency, the impact of control reduction on information quality and the returns on monitoring effort. I find that demand for a layer of supervisors exists only for a limited set of parameters. Furthermore, only in a few extreme cases do the benefits of additional layers of supervisors outweigh the costs. Obviously, there are reasons other than supervision for firms to use hierarchical structure; hence, my results demonstrate that from an information gathering perspective, in many cases, the required information rent associated with a hierarchical structure may outweigh its benefit, and in this respect "flatter" organizations are optimal. Structural changes in the economy that make monitoring more difficult might increase the information rent in a hierarchy. Hence, the analysis in this paper may help explain the recent trend towards "flatter" organizational structures.
{"title":"Information Technology and Optimal Firm Structure","authors":"Amir Ziv","doi":"10.2139/ssrn.194389","DOIUrl":"https://doi.org/10.2139/ssrn.194389","url":null,"abstract":"In this paper I use a principal-agent framework to explore the relation between the hierarchical structure of firms and the accounting information technologies available to them. I allow the principal to choose the number of layers in the firm, the number of agents in each layer, and the quantity and quality of information in the firm (subject to the available information technology). Alternative information technologies are characterized by their monitoring efficiency, the impact of control reduction on information quality and the returns on monitoring effort. I find that demand for a layer of supervisors exists only for a limited set of parameters. Furthermore, only in a few extreme cases do the benefits of additional layers of supervisors outweigh the costs. Obviously, there are reasons other than supervision for firms to use hierarchical structure; hence, my results demonstrate that from an information gathering perspective, in many cases, the required information rent associated with a hierarchical structure may outweigh its benefit, and in this respect \"flatter\" organizations are optimal. Structural changes in the economy that make monitoring more difficult might increase the information rent in a hierarchy. Hence, the analysis in this paper may help explain the recent trend towards \"flatter\" organizational structures.","PeriodicalId":180033,"journal":{"name":"Journal of Accounting Abstracts","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2000-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126401927","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
During the 1990's studies of management accounting practices in Europe and in Latin America have given us data on 23 countries. In this paper we use this data to identify five distinct aspects of national management accounting culture being: 1. The influence of regulations on official recommendations; 2. The source of management accountants; 3. Influence from one country to another; 4. Variations in use of specific techniques; 5. Variations in the objectives of the management accounting system. We then identify seven significant implications of the manager operating in the multinational environment.
{"title":"Variations in National Management Accounting Approaches","authors":"Oriol Amat, J. Blake, Ester Oliveras","doi":"10.2139/ssrn.199067","DOIUrl":"https://doi.org/10.2139/ssrn.199067","url":null,"abstract":"During the 1990's studies of management accounting practices in Europe and in Latin America have given us data on 23 countries. In this paper we use this data to identify five distinct aspects of national management accounting culture being: 1. The influence of regulations on official recommendations; 2. The source of management accountants; 3. Influence from one country to another; 4. Variations in use of specific techniques; 5. Variations in the objectives of the management accounting system. We then identify seven significant implications of the manager operating in the multinational environment.","PeriodicalId":180033,"journal":{"name":"Journal of Accounting Abstracts","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2000-01-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126004256","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The 1991 amendment to the auditor appointment requirement of Section 86 of the Ontario Municipal Act removes certain barriers to entry into the Ontario municipal audit market. The purpose of this study is to provide evidence that the amendment has enhanced competition in this market. The results indicate that there is a general reduction in the real municipal audit fees, compared to the pre-amendment levels. However, notwithstanding the heightened competition, the Big-Six audit firms continue to command audit fee premiums over the non Big-Six audit firms. This suggests that Big-Six audit fee premiums possibly reflect brand name reputation rather than monopoly/oligopoly rents.
{"title":"Competition and Big-Six Brand Name Reputation: Evidence from the Ontario Municipal Audit Market","authors":"S. Bandyopadhyay, J. Kao","doi":"10.2139/ssrn.233398","DOIUrl":"https://doi.org/10.2139/ssrn.233398","url":null,"abstract":"The 1991 amendment to the auditor appointment requirement of Section 86 of the Ontario Municipal Act removes certain barriers to entry into the Ontario municipal audit market. The purpose of this study is to provide evidence that the amendment has enhanced competition in this market. The results indicate that there is a general reduction in the real municipal audit fees, compared to the pre-amendment levels. However, notwithstanding the heightened competition, the Big-Six audit firms continue to command audit fee premiums over the non Big-Six audit firms. This suggests that Big-Six audit fee premiums possibly reflect brand name reputation rather than monopoly/oligopoly rents.","PeriodicalId":180033,"journal":{"name":"Journal of Accounting Abstracts","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2000-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125513550","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sullivan suggests that the alternative audit approaches adopted by accounting firms be expressed in terms of “structure” and “judgement”, with a division provided by the degree to which auditor judgement is replaced by structured quantitative algorithms. Cushing and Loebbecke attempt to operationalise this division by examining the guidance provided to practising auditors by their firms. Kinne extends this study by classifying accounting firms as “structured”, “intermediate” or “unstructured” in terms of their audit methodologies. Provides a test of Kinney’s classification by examining the tolerance of accounting firms to accounting policy choices which have an income effect in their clients’ financial statements. Argues that those firms with a structured audit approach will manage audit risk through a greater reliance on mechanistic procedures, resulting in a greater tolerance of income manipulation. The results are confirmatory for the period under study, but evidence is provided to suggest that audit firms have subsequently become less diversified in their approach.
{"title":"Structure Versus Judgement in the Audit Process: A Test of Kinney's Classification","authors":"Malcolm Smith, B. Fiedler, J. Kestel, Bruce Brown","doi":"10.2139/ssrn.219308","DOIUrl":"https://doi.org/10.2139/ssrn.219308","url":null,"abstract":"Sullivan suggests that the alternative audit approaches adopted by accounting firms be expressed in terms of “structure” and “judgement”, with a division provided by the degree to which auditor judgement is replaced by structured quantitative algorithms. Cushing and Loebbecke attempt to operationalise this division by examining the guidance provided to practising auditors by their firms. Kinne extends this study by classifying accounting firms as “structured”, “intermediate” or “unstructured” in terms of their audit methodologies. Provides a test of Kinney’s classification by examining the tolerance of accounting firms to accounting policy choices which have an income effect in their clients’ financial statements. Argues that those firms with a structured audit approach will manage audit risk through a greater reliance on mechanistic procedures, resulting in a greater tolerance of income manipulation. The results are confirmatory for the period under study, but evidence is provided to suggest that audit firms have subsequently become less diversified in their approach.","PeriodicalId":180033,"journal":{"name":"Journal of Accounting Abstracts","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2000-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131578970","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Among the new disclosures required by "EITF 94-3" is the requirement that firms disclose the nature and amounts of the material components of a restructuring charge. The objective of this paper is to assess whether these components provide information to financial statement users beyond that contained in the aggregate charge. The evidence is consistent with the decomposition of the charge providing incremental information that would be lost if only the aggregate number is reported. The results also appear to suggest that analysts interpret restructurings as bad news and that inventory writedowns and employee terminations are interpreted as the most negative restructuring components. Copyright Blackwell Publishers Ltd 2002.
{"title":"Evidence on the Incremental Information Contained in the Components of Restructuring Charges","authors":"Thomas J. Lopez","doi":"10.2139/ssrn.184048","DOIUrl":"https://doi.org/10.2139/ssrn.184048","url":null,"abstract":"Among the new disclosures required by \"EITF 94-3\" is the requirement that firms disclose the nature and amounts of the material components of a restructuring charge. The objective of this paper is to assess whether these components provide information to financial statement users beyond that contained in the aggregate charge. The evidence is consistent with the decomposition of the charge providing incremental information that would be lost if only the aggregate number is reported. The results also appear to suggest that analysts interpret restructurings as bad news and that inventory writedowns and employee terminations are interpreted as the most negative restructuring components. Copyright Blackwell Publishers Ltd 2002.","PeriodicalId":180033,"journal":{"name":"Journal of Accounting Abstracts","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"1999-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132439024","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：