The Valuation Consequence of Accounting Changes: A Multi-Year Examination

1993 ◽  
Vol 8 (4) ◽  
pp. 475-494 ◽  
Author(s):  
Bala G. Dharan ◽  
Baruch Lev
Keyword(s):  
Stock Returns ◽  
Positive Impact ◽  
Abnormal Returns ◽  
Cross Sectional ◽  
Earnings Response Coefficients ◽  
Financial Variables ◽  
Ex Post ◽  
Earnings Response ◽  
Accounting Changes

We examine the valuation impact of changes in the accounting procedures and estimates underlying reported financial data in the year of the change as well as in the postchange years. Since most accounting changes have undisclosed effect on financial variables in subsequent years in addition to the earnings impact disclosed in the year of the change, an accounting change might be motivated by its long-term valuation effect, even if investors are cognizant of the initial earnings impact and fully account for it in the year of the change. This conjecture is empirically examined for the first time in this study. Our tests are based on a cross-sectional examination of the valuation impact of the earnings effect of accounting changes in the year of the change and a longitudinal examination of the behavior of returns in the postchange years. We also provide descriptive evidence indicating that earnings management is a managerial motive for changing accounting techniques. Cross-sectionally, for income-increasing accounting changes, our results show that investors' valuations seem to reflect a concern for the reduced quality of earnings, as reflected by smaller earnings response coefficients and R2s. However, the decline is not attributable specifically to the earnings effect of the accounting change. Similarly, the earnings effect of income-decreasing changes does not have valuation impact in the year of the accounting change. Although investors appear to largely ignore the accounting changes in the year they are made, our longitudinal test does show that firms undertaking accounting changes experience different long-term returns relative to other firms in the postchange period. However, income-increasing accounting changes are associated with negative valuation changes in the postchange period, rather than the positive impact expected from the conjecture stated above. Over the five years following the year of the accounting change, abnormal returns of income-decreasing firms exceed those of income-increasing firms substantially, with the latter firms experiencing large negative returns over the period. We demonstrate a trading rule that, ex post, exploits the information contained in the accounting changes to yield large abnormal stock returns. The results suggest that income-increasing accounting changes are perhaps the first visible sign indicating other hidden, fundamental problems that get revealed in subsequent years.

scholarly journals EARNINGS RESPONSE COEFFICIENTS IN THE GREEK MARKET

2013 ◽  
Vol 14 (2) ◽  
pp. 414-431 ◽  
Author(s):  
Dimitrios I. Maditinos ◽  
Željko Šević ◽  
Jelena Stankevičienė ◽  
Nikolaos Karakoltsidis
Keyword(s):  
Stock Returns ◽  
Stock Return ◽  
Stock Exchange ◽  
Cross Sectional ◽  
Earnings Response Coefficients ◽  
Earnings Response ◽  
Athens Stock Exchange ◽  
One Year ◽  
The Relationship ◽  
Cumulative Model

The paper explores the relationship between accounting information and stock returns of the companies listed on the Athens Stock Exchange (ASE) in the period 1998–2008. Publicly available financial data on the companies included in the ASE during 1998–2008 have been collected and processed. The data sample consists of 245 companies and varies from 2,166 to 1,441 firm-year observations. The research methodology has been based on the extension of the model introduced by Kothari and Sloan (1992) and investigates whether the level of earnings divided by price at the beginning of the stock return period is associated with returns in the context of ‘prices lead earnings’ using annual and quarterly data. Cross-sectional regression analysis points to a significant relationship between earnings and returns on measurement windows of one year and longer. Similar results have been found in the case of a cumulative model where earnings are aggregated up to four years; however, relationship in the short measurement window up to three quarters has resulted in low earnings response coefficients.

scholarly journals Environmental sustainable value in agriculture revisited: How does Common Agricultural Policy contribute to eco-efficiency?

2020 ◽  
Vol 16 (1) ◽  
pp. 137-152
Author(s):  
Bazyli Czyżewski ◽  
Anna Matuszczak ◽  
Aleksander Grzelak ◽  
Marta Guth ◽  
Adam Majchrzak
Keyword(s):  
Agricultural Policy ◽  
Common Agricultural Policy ◽  
Positive Impact ◽  
Public Support ◽  
Small Farms ◽  
The European Union ◽  
Cross Sectional ◽  
Sustainable Value ◽  
Negative Effect

AbstractThe conflict between capital-intensive agriculture, often called industrial agriculture, and sustainable farming is ongoing, and not because of Western European countries, where intensification is increasingly sustainable. It is caused by several million small farms in Central and Eastern Europe that must choose a long-term development path. This is also a dilemma for agricultural policy: Are small farms so environmentally friendly that they should play the role of ‘landscape guardians’ at the expense of public support and economic vegetation, or should they strive to improve productivity through investments? This study offers a methodological contribution to the value-based sustainability approach by computing indicators of environmental sustainable value (ESV). The authors have attempted to combine the value-oriented approach with frontier benchmarking. They then tested how the European Union Common Agricultural Policy (CAP) schemes contribute to ESV using a long-term panel of regionally representative farms from Farm Accountancy Data Network (FADN) with regard to factor endowments, for the years 2004–2017. The seminal within–between specification was employed to control the time variant and time invariant space heterogeneity of European regions. The main finding is that higher investment support is beneficial to ESV. Regarding factor endowment influence, there was a positive impact of the capital–labour ratio. Except the cross-sectional impact of environmental subsidies, the payments exert a negative effect on ESV.

scholarly journals Impact of Open-Market Share Repurchases on Long-Term Stock Returns

SAGE Open ◽  
2016 ◽  
Vol 6 (4) ◽  
pp. 215824401667019 ◽  
Author(s):  
Mohamed Albaity ◽  
Diana Syafiza Said
Keyword(s):  
Stock Returns ◽  
Abnormal Returns ◽  
Sampling Period ◽  
Share Repurchases ◽  
Open Market ◽  
Calendar Time ◽  
Price Performance ◽  
Long Run ◽  
Portfolio Approach

After the Asian financial crisis in 1997, firms listed on Bursa Malaysia were allowed to repurchase their shares on the open market. The number of companies engaged in share buyback is increasing and has become a tool to stabilize price by signaling undervaluation of the share. However, studies on share buyback in Malaysia are limited to the price performance surrounding the buyback events. This study aims to fill this gap by examining long-run price performance after the actual share buyback event over a sampling period of 2 years from 2009 to 2010 for Malaysian firms listed on FTSE Bursa Malaysia. There is no evidence to conclude that there exist long-term abnormal returns using the calendar-time portfolio approach that support the inefficient market hypothesis. On the contrary, buy-and-hold method was found to be significant supporting that the Malaysian stock market is semi-strong efficient.

Stock Market Anomalies

2017 ◽  
Author(s):  
Steve Fan ◽  
Linda Yu
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Financial Economic ◽  
Economic Research ◽  
Market Anomalies ◽  
Cross Sectional ◽  
Additional Risk ◽  
Asset Pricing Models ◽  
Stock Market Anomalies

Stock market anomalies representing the predictability of cross-sectional stock returns are one of most controversial topics in financial economic research. This chapter reviews several well-documented and pervasive anomalies in the literature, including investment-related anomalies, value anomalies, momentum and long-term reversal, size, and accruals. Although anomalies are widely accepted, much disagreement exists on the underlying reasons for their predictability. This chapter surveys two competing theories that attempt to explain the presence of stock market anomalies: rational and behavioral. The rational explanation focuses on the improvement of the existing asset pricing models and/or searching for additional risk factors to explain the existence of anomalies. By contrast, the behavioral explanation attributes the predictability to human behavioral biases in collecting and processing financial information, as well as in making investment decisions.

Matched-Long Term Maturity Stock and Bond Returns in International Markets

2002 ◽  
Vol 46 (2) ◽  
pp. 45-53
Author(s):  
Nusret Cakici ◽  
Mitchell Kellman ◽  
Elli Kraizberg
Keyword(s):  
Stock Returns ◽  
Average Rate ◽  
International Markets ◽  
Strong Positive Correlation ◽  
Bond Yields ◽  
Cross Sectional ◽  
Inflation Rates ◽  
Bond Returns ◽  
Sectional Analysis

This paper examines the relationship between real stock returns and matched-maturity long-term bond yields for 16 countries. We find a strong positive correlation between real stock returns and corresponding matched-maturity long-term bond returns for every country in the sample. Our findings also indicate that the volatility of long term real stock returns is closely related to the volatility of long term real bond yields. Finally, an additional cross-sectional analysis indicates that the sensitivity of real stock returns to real bond yields in each country is negatively related to the average rate of inflation and the coefficient of variation of these inflation rates.

scholarly journals Another R&D Anomaly?

2014 ◽  
Vol 30 (4) ◽  
pp. 1211
Author(s):  
C. Catherine Chiang ◽  
Yilun Shi ◽  
Lin Zhao
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Empirical Evidence ◽  
High Tech ◽  
Ongoing Debate ◽  
Bankruptcy Risk ◽  
Earnings Response Coefficients ◽  
Additional Input ◽  
Earnings Response ◽  
Market Status

In this paper, we investigate the relation between stock returns and R&D spending under different market conditions. Our empirical evidence suggests that investors response to R&D activities varies according to stock market status. Following the conventional definitions of markets, we first categorize the market into four different states: slightly up (up by 0-20%), bull (up by more than 20%), slightly down (down by 0-20%), and bear (down by more than 20%). Using firms in high-tech industries from 1992 to 2009 as our sample, we show that investors value R&D spending consistently positively only when the market (proxied by the S&P 500) is up. R&D is valued less in the downward market and R&D response coefficients even turn negative during bear markets. However, earnings response coefficients are consistently positive regardless of market status. The results remain unchanged after we control for beta, bankruptcy risk, size, and different measuring windows. Our findings cannot be explained by risk-based hypothesis. The study advances our understanding of the relation between stock returns and R&D activities by empirically documenting its variations in market valuation across different market states; particularly, we found empirical evidence that R&D response coefficients in the down markets are negative. The study also provides additional input to the ongoing debate on finding the appropriate accounting treatment for intangible assets.

scholarly journals Long-term body composition improvement in post-menopausal women following bariatric surgery: a cross-sectional and case-control study

2021 ◽  
Author(s):  
Sara Santini ◽  
Nathalie Vionnet ◽  
Jérôme Pasquier ◽  
Michel Suter ◽  
Didier Hans ◽  
...  
Keyword(s):  
Bariatric Surgery ◽  
Weight Loss ◽  
Body Composition ◽  
Lipid Profile ◽  
Positive Impact ◽  
Case Control ◽  
Cross Sectional ◽  
Menopausal Women ◽  
Post Menopausal

Objective: Bariatric surgery (BS) induces loss of body fat mass (FM) with an inexorable loss of lean mass (LM). Menopause leads to deleterious changes in body composition (BC) related to estrogen deficiency including LM loss and increase in total and visceral adipose tissue (VAT). This study aims to describe long-term weight evolution of post-menopausal women after RYGB (Roux-en-Y gastric bypass) and to compare BC between BS patients versus post-menopausal non-operated women. Design: Cross-sectional study of 60 post-menopausal women who underwent RYGB ≥ two years prior to the study with nested case-control design. Methods: Post-menopausal BS women were matched for age and BMI with controls. Both groups had DXA scan, lipids and glucose metabolism markers assessment. Results: Median follow-up was 7.5(2–18) years. Percentage of total weight loss (TWL%) was 28.5±10%. After RYGB, LM percentage of body weight (LM%) was positively associated with TWL% and negatively associated with nadir weight. Forty-one post-BS women were matched with age- and BMI-controls. Post-BS patients showed higher LM% (57.7%[±8%] versus 52.5%[±5%], p=0.001), reduced FM% (39.4%[±8.4%] versus 45.9%[±5.4%] p<0.01) and lower VAT (750.6g[±496] versus 1295.3g[±688], p<0.01) with no difference in absolute LM compared to controls. While post-BS women showed a better lipid profile compared to controls, no difference was found in glucose markers. Conclusions: Post-menopausal women after RYGB have a lower FM and VAT, preserved LM and a better lipid profile compared to controls. Weight loss after RYGB seems to have a persistent positive impact on metabolic health.

scholarly journals Applicability of Z-score Models on the Agricultural Companies in the Republic of Srpska (Bosnia and Herzegovina)

2018 ◽  
Vol 18 (4) ◽  
pp. 227
Author(s):  
Tamara Stojanović ◽  
Ljiljana Drinić
Keyword(s):  
Safe Zone ◽  
Z Score ◽  
Financial Variables ◽  
Financial Difficulties ◽  
Ex Post ◽  
Ex Ante ◽  
The Republic ◽  
Near Future ◽  
Ex Post Analysis

The aim of our research was to test the predictability of Altman’s Z-score models in the case of agricultural companies in the Republic of Srpska. Due to the fact that according to these models the companies from the critical zone are supposed to go bankrupt in the near future, while the companies from the safe zone are not supposed to go bankrupt, these two groups of companies have been subject to ex-ante analysis during the period of five years (2011-2015) in order to estimate the predicting efficiency of Z-score models. The authors have also performed the ex-post analysis to see how the bankrupt companies had been classified according to these models in the years preceding their bankruptcy. The results of these analyses show that Z-score models are not reliable in predicting bankruptcy, nor for the creditworthiness analysis, but can be useful in identifying agricultural companies with long-term financial difficulties especially if other, non-financial variables are included.

scholarly journals The value of a Patient Access Portal in primary care: a cross-sectional survey of 62,486 registered users in the UK

2019 ◽  
Vol 19 (4) ◽  
pp. 855-872 ◽  
Author(s):  
Mohammed A. Mohammed ◽  
Jane Montague ◽  
Muhammad Faisal ◽  
Laura Lamming
Keyword(s):  
Primary Care ◽  
Medical Records ◽  
Positive Impact ◽  
Patient Access ◽  
Cross Sectional Survey ◽  
Cross Sectional ◽  
Long Term Conditions ◽  
Monetary Value ◽  
Online Access

Abstract In England, primary care patients have access to Patient Access Portals (PAPs), enabling them to book appointments, request repeat medication prescriptions, send/receive messages and review their medical records. Few studies have elicited user views and value of PAPs, especially in a publicly funded primary care setting. This study aimed to elicit the value users of PAPs place on online access to medical records and linked services. Secondary data analysis of the completed electronic survey (available 2 May 2015–27 June 2015) distributed via the EMIS PAP to all its registered users. EMIS designed the survey; responses were voluntary. There were 62,486 responders (95.7% self-completed). The PAP was mainly used for medication requests (86.3%) and online appointment bookings (78.4%), and, to a lesser extent, medical record viewing (18.3%) and messaging (9.5%). The majority (70%) reported a positive impact from using it. One in five rated it as their favourite online service second only to online banking. Almost three out of four responders stated that availability of online access would influence their move to another practice. Nonetheless, responders were reluctant to award a high monetary value to it. These findings correlated with the number of long-term conditions. The majority of users place a relatively high value, but not monetary value, on the PAP and report a positive impact from using it. The potential for PAPs to enhance patient experience, especially for those with long-term conditions, appears to be largely untapped. Research exploring the reasons for non-use is also required.

scholarly journals How much does participatory flood management contribute to stakeholders' social capacity building? Empirical findings based on a triangulation of three evaluation approaches

2013 ◽  
Vol 13 (6) ◽  
pp. 1427-1444 ◽  
Author(s):  
M. Buchecker ◽  
S. Menzel ◽  
R. Home
Keyword(s):  
Social Learning ◽  
Capacity Building ◽  
Evaluation Studies ◽  
Household Survey ◽  
Flood Management ◽  
Cross Sectional ◽  
Ex Post ◽  
Evaluation Approaches ◽  
Survey Approach

Abstract. Recent literature suggests that dialogic forms of risk communication are more effective to build stakeholders' hazard-related social capacities. In spite of the high theoretical expectations, there is a lack of univocal empirical evidence on the relevance of these effects. This is mainly due to the methodological limitations of the existing evaluation approaches. In our paper we aim at eliciting the contribution of participatory river revitalisation projects on stakeholders' social capacity building by triangulating the findings of three evaluation studies that were based on different approaches: a field-experimental, a qualitative long-term ex-post and a cross-sectional household survey approach. The results revealed that social learning and avoiding the loss of trust were more relevant benefits of participatory flood management than acceptance building. The results suggest that stakeholder involvements should be more explicitly designed as tools for long-term social learning.

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