Evidence of the Relation between Accounting for Equity Investments and Equity Valuation

Income recognition events for equity investments reflect an investor's ability to influence the activities of an investee and therefore the timing of income realization to the investor. Investor firms with passive equity investments recognize investment income when investee dividends are declared, whereas investors with nonpassive equity investments recognize investment income as investee income is earned. To determine whether market participants associate investor income realization with the income recognition events, investor and investee security return correlations are examined around investee dividend and earnings announcements. The correlations suggest an association between passive and nonpassive investor valuation and investee dividend and earnings announcements that corresponds to the accounting income recognition procedures for equity investments. Analysis of the relative timing of investor and investee announcements indicates that the results are not due to a naive fixation on accounting revenue recognition events. Rather, the results suggest differences in the substance of the investor-investee relation between passive and nonpassive investments. The results are robust to alternative specifications and controls for relative investment size and industry affiliation.

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The value relevance of intellectual capital disclosure: empirical evidence from Kuwait

Journal of Financial Regulation and Compliance ◽

10.1108/jfrc-06-2016-0053 ◽

2017 ◽

Vol 25 (1) ◽

pp. 22-38 ◽

Cited By ~ 6

Author(s):

Mishari M. Alfraih

Keyword(s):

Empirical Evidence ◽

Financial Reporting ◽

Intellectual Capital ◽

Value Relevance ◽

Practical Implication ◽

Listed Companies ◽

Annual Reports ◽

Equity Valuation ◽

Content Type ◽

Market Participants

Purpose Drawing on market efficiency theory and studies on intellectual capital (IC) disclosure, this study aims to examine if IC information provided in the corporate annual reports of Kuwait Stock Exchange (KSE) listed companies in 2013 is value-relevant. Design/methodology/approach The analysis is divided into two parts. First, the level of intellectual capital disclosure (ICD) of KSE-listed companies is examined using the content analysis method. Second, the value relevance of financial reporting is examined empirically using Ohlson’s (1995) valuation model. Findings The results reveal that ICD is positively and significantly associated with market value, suggesting that greater ICD is valued by KSE market participants, who incorporate it into their valuation models. Practical implications Given the importance of ICD in enhancing equity valuation, a practical implication of this study is to make managers aware of its positive and significant effect on equity valuation, which may encourage companies to increase their level of disclosure. Originality/value This is the first study of the association between the level of ICD and the value relevance of financial reporting for market participants in Kuwait. It therefore extends and confirms the prior literature by broadening its scope to include frontier markets. Furthermore, it provides empirical evidence in support of recent calls from regulators and professional bodies for information that supplements and complements traditional financial reporting.

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Aggregate market attention around earnings announcements

Asian Review of Accounting ◽

10.1108/ara-03-2018-0071 ◽

2020 ◽

Vol 28 (4) ◽

pp. 591-617

Author(s):

William M. Cready ◽

Abdullah Kumas

Keyword(s):

Earnings Announcements ◽

Equity Market ◽

Future Research ◽

Activity Levels ◽

Investor Attention ◽

Earnings Announcement ◽

Content Type ◽

Market Participants ◽

Pricing Efficiency ◽

The Impact

PurposeThis analysis is the first to explore the overall roles of the offsetting attraction and distraction influences of earnings news in shaping the level of attention given to the equity market by market participants.Design/methodology/approachWe use multivariate regression approach and examine how trading activity levels within the set of non-announcing firms varies with respect to collective measures of contemporaneous earnings announcement visibility. We employ attention and information transfer theories in our hypothesis development.FindingsThis analysis is the first to explore the overall roles of the offsetting attraction and distraction influences of earnings news in shaping the level of attention given to the equity market by market participants. Specifically, we examine how the number of earnings announcement activity affects investor attention as measured by trading volume given to the set of non-announcing firms. We find that while earnings announcement numbers lower trading volume responses to earnings news among announcing firms (consistent with Hirshleifer et al., 2009), their distractive influence does not carry over into the market as a whole. More importantly, investor attention to both the overall market and the larger subset of non-announcing firms increase in response to earnings news activity levels. However, after decomposing the announcers as same-industry and different-industry announcers, we find that investor attention to the non-announcing segment of the market increases with the number of same-industry announcers, but actually seems to decrease (i.e. they distract attention) with the number of different-industry announcers. We also find that the associated earnings surprise brings attention to non-announcing firms (consistent with earnings news is relevant to overall market price movements). Finally, we find that distraction effects are attenuated in the financial crisis period.Research limitations/implicationsA promising area of future research is to examine the relation between market pricing efficiency and aggregate earnings activity for the set of non-announcing firms. Although it will be a challenging task to measure pricing efficiency for the non-announcers, this will complement the prior literature only focusing on the announcing segment of the market.Practical implicationsFirst, instead of assessing the impact of number of earnings announcements on the subset of announcing firms, which is a micro-level perspective, we identify the impact of news arrivals on all firms in the market including the vastly larger set of non-announcing firms. Second, by decomposing the number of announcements into industry-related and -unrelated news we show that different types of news arrivals spark investor attention differently, suggesting the importance of categorizing the news into related and unrelated industries.Social implicationsA potential future area of research identified by our analysis is to investigate what type of investors' attention is distracted or attracted during the earnings announcements. A promising area of future research is to examine the relation between market pricing efficiency and aggregate earnings activity for the set of non-announcing firms.Originality/valueThis paper is the first one exploring the overall roles of the offsetting attraction and distraction influences of earnings announcements in shaping the level of investor attention given to the equity market by market participants. Our findings should be of interest to investors, analysts, security market regulators and researchers.

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A Statistical Inquiry into the Correlation of Income and Balance Sheet Metrics on Equity Valuation

Journal of Accounting and Finance ◽

10.33423/jaf.v18i5.40 ◽

2018 ◽

Vol 18 (5) ◽

Keyword(s):

Balance Sheet ◽

Equity Valuation

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Using market participants expectations and judgements to forecast short and mid-term real estate market developments

10.15396/eres2004_583 ◽

2004 ◽

Keyword(s):

Real Estate ◽

Real Estate Market ◽

Market Participants

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The Privatisation of Housing Space: Market Potential and Market Participants in Germany

10.15396/eres2005_186 ◽

2005 ◽

Keyword(s):

Market Potential ◽

Market Participants

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International Conference "Ecology. Human. Society"

Linnaeus Eco-Tech ◽

10.15626/eco-tech.2012.022 ◽

2017 ◽

Author(s):

Daniel Benatov

Keyword(s):

Educational Process ◽

Direct Access ◽

Human Society ◽

Public Authorities ◽

State Institutions ◽

The Public ◽

Market Participants ◽

New Information ◽

Training Courses ◽

Process Element

Our conference is the first project of Student Science Association, which was restored in our University in 1998. The main peculiarity of the conference is the student organizing committee. The conference was attended by representatives of Russia, Belarus, Sweden, Poland, Bulgaria, Armenia, Azerbaijan, Czech Republic, Lithuania, Latvia, Georgia, Iran, not mentioning hundreds of Ukrainian participants. We’re happy with the fact that our conference allows students to discover new information, which they wouldn’t find in training courses manuals; contrariwise businesses and organizations can get direct access to young and qualified staff. We believe that events like our conference are useful for the young scientists and also for the public authorities and businesses. Conference "Ecology. Human. Society "is a part of feedback between universities and market participants. The conference has overgrown limits of being simple educational process element. Today, it is a serious recruiting resource for state institutions and businesses - an important part of a mutually beneficial dialogue.

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