The Value Relevance of Financial Information Under the Influence of Country Risks. The Case of the Indian Listed Companies

AbstractIn the decision-making process investors need quality financial information based on reported accounting numbers. Such numbers are present in financial statements and must meet a series of fundamental characteristics, such as relevance and faithful representation. The present paper aims to analyse and assess the value relevance of financial information on the financial market in India under the influence of the main country risk components (i.e. economic risk and freedom to set up businesses, corruption control, financial, fiscal, monetary and investment freedom). The research was carried out on a sample of companies listed on the regulated market in India between 2006 and 2014. The results of applying general linear models have shown that, over time, the country risk can have a significant influence on the value relevance of the financial statements reported at the financial market level.

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Family business valuation in emerging economies: the arcor case

Emerald Emerging Markets Case Studies ◽

10.1108/eemcs-02-2021-0057 ◽

2021 ◽

Vol 11 (4) ◽

pp. 1-52

Author(s):

Florencia Roca

Keyword(s):

Latin American ◽

Family Business ◽

Cost Of Capital ◽

Financial Statements ◽

Country Risk ◽

Local Economy ◽

Financial Information ◽

Developing Economy ◽

Private Company ◽

Content Type

Learning outcomes This case can be used to help students achieve the following objectives: To project financial statements and assemble different pieces of financial information to create a valuation model (objective #1, create), To calculate a value for Arcor shares, supporting the estimated value with the chosen assumptions and methodologies (objective #2, evaluate), To draw connections between four different approaches to valuation (DCF, EVA, RV and VI), contrasting them and weighting their advantages and limitations (objective #3, analyze), To examine the relationship between forecasted financial statements and valuation (objective #3, analyze), To discuss the calculation of the Weighted Average Cost of Capital in a new situation as is an emerging economy, with the corresponding country-risk adjustment (objective #4, apply), To discuss the sources of value creation in a family-owned private company in a developing economy (objective #4, apply), To understand the dilemma that the head of a company was facing, identifying the three possible financing alternatives discussed in the text as follows: corporate bonds, earnings reinvestment and an IPO (objective #5, understand). To recall basic facts, as the main character’s opinion on the direction of the local economy or the fact that Arcor already complies with the information requirements of a public company (objective #7, remember). Case overview/synopsis This case is based on the valuation of the world’s largest candy maker, Arcor S.A.I.C., originally a Latin American company, which remains a private family business. The key problem presented by the case is the use of different valuation approaches to price Arcor shares, in view of a possible Initial Public Offer. The case illustrates the application of four main valuation approaches as follows: Discounted Cash Flow (DCF), Economic Value Added (EVA), Relative Valuation (RV) and Value Investing (VI). Additionally, it includes a fundamental analysis of eight years of historical financial information and the preparation of forecasted financial statements. Set in a developing economy, the Arcor case introduces the complexities of calculating the cost of capital with the inclusion of country risk, as well as the financial analysis distortions caused by an environment of high inflation. Complexity academic level The Arcor case is appropriate to be used in graduate courses of Corporate Finance, Valuation or Private Equity. Supplementary materials Teaching notes are available for educators only. Subject code CSS 1: Accounting and Finance.

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The Limitations of Financial Reporting on Innovation and Its Value-Relevance for the Investor's Decision-Making Process

Handbook of Research on Entrepreneurship, Innovation, and Internationalization - Advances in Business Strategy and Competitive Advantage ◽

10.4018/978-1-5225-8479-7.ch015 ◽

2019 ◽

pp. 390-418

Author(s):

Francisco Leote ◽

Ana Damião

Keyword(s):

Decision Making ◽

Financial Reporting ◽

Value Relevance ◽

Financial Statements ◽

Individual Characteristics ◽

Decision Making Process ◽

Accounting Systems ◽

Financial Factors ◽

The Individual ◽

Industry Sectors

This chapter aims to present some limitations of financial reporting on innovation with an impact on the investor's decision-making process. In order to do so, the authors show how accounting recognizes and measures innovation factors: the intangibles. Based on the literature, the authors discuss how the value relevance of financial reporting on innovation is conditioned by non-financial factors. The impacts of the adoption of IFRSs, the effect of the industry sectors and the effect of the individual characteristics of the different countries on the value relevance of the intangible assets are analyzed. The literature suggests a decrease in the value relevance of financial statements due to the manner in which intangibles are recognized and measured in accounting. However, financial reporting on innovation is value relevant to the investor's decision-making and is conditioned by non-financial factors. Value relevance differs among different industry sectors, between different countries and is conditioned by the accounting systems used in the preparation of the financial information.

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The convergence of the Central American countries to International Accounting Standards

Revista de Administração Pública ◽

10.1590/0034-7612131665 ◽

2016 ◽

Vol 50 (2) ◽

pp. 265-283 ◽

Cited By ~ 7

Author(s):

Carlos Araya-Leandro ◽

María Del Carmen Caba-Pérez ◽

Antonio M. López-Hernandez

Keyword(s):

Financial Management ◽

Financial Statements ◽

Financial Information ◽

Central American ◽

International Accounting Standards ◽

Public Authorities ◽

Decision Making Processes ◽

Set Up ◽

New Strategies

Abstract: In the last few decades, Central American countries are making a significant effort in order to modernize their governments' legislation both on financial management and systems of financial information. In this sense, these countries aim to enhance the quality of public financial information in order to improve decision-making processes, decrease the level of corruption, and keep citizens informed. In this context, the purpose of this paper is twofold. Firstly, to assess the degree of similarity of the financial information that is being developed by Central American governments with regard to the recommendations set up by Ipsas, and secondly, to analyse the efforts and the strategies that those countries are carrying out in the process of implementing those standards. To determine the differences in the information containing the annual financial statements issued by national public authorities and the recommendations set up by Ipsas we conducted a deductive content analysis. In view of the results we can say that the quality of annual financial statements presented by the countries in Central America, in comparison to the recommendations by the Ipsas concerning Ifac information, is not enough. Hence, in order to operate significant changes, it is still necessary to create new strategies for the implementation of the Ipsas.

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Association between Accounting Numbers and Value of Food and Beverages Firms in Nigeria

International Journal of Economics and Finance ◽

10.5539/ijef.v7n12p245 ◽

2015 ◽

Vol 7 (12) ◽

pp. 245

Author(s):

Nyor Terzungwe ◽

Nasiru Rabiu

Keyword(s):

Value Relevance ◽

Stock Exchange ◽

Investment Decision ◽

Market Price ◽

Accounting Information ◽

Financial Statements ◽

Annual Reports ◽

Market Values ◽

Food And Beverages ◽

Accounting Numbers

The degree of statistical relationship between the contents of financial statements and market price of equity is what is termed Value relevance of accounting information. It explains stock market measures using financial information variables and it is a very useful guide to investors in pricing of shares. This study examines the extent of association between accounting information variables of earnings, dividend and book value of equity and market value of listed Food and Beverages firms in Nigeria. Data were collected from the published annual reports of the sampled firms and their market values obtained from the official daily list of the Nigerian Stock Exchange (NSE) over a period of 10 years (2001-2010). Using multivariate regression as technique for data analysis, the study established that accounting information of Food & Beverages companies in Nigeria is value relevant. Accordingly, the study recommends the use of financial statements figures of Food and Beverages firms for investment decision.

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Market Reactions to XBRL-Formatted Financial Information: Empirical Evidence from China

International Journal of E-Business Research ◽

10.4018/ijebr.2014070101 ◽

2014 ◽

Vol 10 (3) ◽

pp. 1-17 ◽

Cited By ~ 1

Author(s):

Emma Y. Peng ◽

John Shon ◽

Christine Tan

Keyword(s):

Financial Statements ◽

Financial Information ◽

Financial Statement ◽

Decision Making Process ◽

Average Volume ◽

Market Reactions ◽

Event Window ◽

Business Reporting ◽

Before And After ◽

Efficient Processing

XBRL (eXtensible Business Reporting Language) facilitates the efficient processing/interpreting of corporate financial information by investors. This paper examines market reactions to financial statement filings in China in the period before and after the XBRL mandate in China to assess the extent to which XBRL may impact the processing of financial information. It finds that absolute price reactions of financial statement filings are larger (smaller) in the post-XBRL (pre-XBRL) period. This result holds for the cumulative 3-day window surrounding filings, as well as for each individual day during the event window. This paper also finds similar results for the average volume of trading around these event windows. Consistent with its expectations, its findings suggest XBRL financial statements play a significant role in investors' decision making process.

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Manipulation of Financial Statements Through the Use of Creative Accounting. Case of Romanian Companies

Studia Universitatis „Vasile Goldis” Arad – Economics Series ◽

10.2478/sues-2020-0019 ◽

2020 ◽

Vol 30 (3) ◽

pp. 90-107

Author(s):

Ioana-Lavinia Safta ◽

Monica Violeta Achim ◽

Sorin Nicolae Borlea

Keyword(s):

Decision Making ◽

Stock Exchange ◽

Financial Statements ◽

Financial Information ◽

Decision Making Process ◽

Creative Accounting ◽

Red Flag

AbstractThe manipulation of the information presented through financial statements could represent a significant red flag for suspected fraud. In our paper, we investigated the extent to which the Romanian companies resort to manipulation of information data presented through the reported annual financial statements. For this purpose, we used a group consisting of 62 non-financial companies listed on the Bucharest Stock Exchange for the analyzed period 2017-2018. The results of our study show that a majority percentage of the Romanian companies (approx. 84%) resort to manipulation of information provided through financial statements. Following the analysis carried out by activity fields, the results show that the companies activating in the fields of tourism, constructions, trade and transport resort to the manipulation of financial statements in the percent of 100%, followed by the companies activating in the field of production (86%) and services (50%). Our results are extremely useful to the users of financial information who must acknowledge the risks that they are exposed to in their decision-making process.

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COMPARING THE VALUE RELEVANCE OF SELECTED ACCOUNTING INFORMATION IN CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS: THE CASE OF NIGERIAN LISTED FINANCIAL SERVICE FIRMS

JOURNAL OF ECONOMICS AND SUSTAINABILITY - Vol 3 No 1 (2021) ◽

10.32890/jes2021.3.2.2 ◽

2021 ◽

Vol 3 (Number 2) ◽

pp. 16-32

Author(s):

Kassim Busari ◽

Muhammad Mustapha Bagudo

Keyword(s):

Financial Services ◽

Value Relevance ◽

Group Structure ◽

Market Price ◽

Accounting Information ◽

Financial Statements ◽

Financial Service ◽

Financial Information ◽

Service Firms ◽

Financial Service Firms

In a company with a group structure, financial information is presented in two folds via consolidated and separate financial statements. The reporting of the similarly classified elements of financial statements arranged side by side in two columns carrying two different figures may be puzzling. Consequently, investors and other financial information users having two different figures available to them need to be guided as to which set(s) of information they need to make predictions and decisions. This study provides evidence about the comparative value relevance of accounting information for consolidated and separate financial statement of listed financial service firms in Nigeria. The study population is the entire listed financial services firms throughout the period of 2014-2018. Accounting information was represented by earnings per share, book value per share, dividend per share, and cash flow per share. These proxies were regressed against the market price per share. Data for accounting information were sourced from the annual reports of sampled firms and market prices from the Nigerian stock exchange factbook. A census sampling was used after a three-point filter was applied to the original population. The results show generally that both consolidated and separate accounting information is value relevant. However, consolidated accounting information is found to be more value relevant than separate accounting information. The study thus recommends the strengthening of firms’ operations, re-evaluation of the dividend policy, and enhanced implementation of IFRS standards to enhance value relevant accounting information that will be useful to the shareholders in making informed decision and taking adequate actions.

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Firm Valuation, Market Responses, And Accounting Conservatism

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v29i3.7781 ◽

2013 ◽

Vol 29 (3) ◽

pp. 793

Author(s):

Karin A. Petruska ◽

Gulraze Wakil

Keyword(s):

Stock Returns ◽

Value Relevance ◽

Firm Valuation ◽

Financial Information ◽

Accounting Conservatism ◽

Compelling Evidence ◽

Font Size ◽

Market Responses ◽

Over Time

This study examines whether the components of accounting conservatism as described in Watts (2003a): contracting, litigation, regulation, and taxation, provide insight on the value relevance of financial information. During the years 1993 through 2009, we explore whether these four factors are value relevant in capturing information in contemporaneous stock returns and prices and whether the trends in value relevance for these drivers vary across time. Specifically, our study aids in helping to reconcile the competing results of Balachandran and Mohanram (2011), who state that there is no compelling evidence that firms with higher levels of accounting conservatism exhibit decreasing levels of value relevance, and Lev and Zarowin (1999), who suggest that accounting conservatism is a factor causing a decline in the usefulness of financial information over time. Our results provide evidence that the level of contracting, litigation, and regulation are associated with returns and prices and their value relevance has not decreased over time, findings which differ from Lev and Zarowin (1999), and support Balachandran and Mohanram (2011), such that the expectation of these drivers are associated with value relevance. In addition, we find less consistent evidence that the taxation explanation of accounting conservatism is associated with value relevance.

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Coordination for the European Union

The Oxford Handbook of Danish PoliticsThe Oxford Handbook of Danish Politics ◽

10.1093/oxfordhb/9780198833598.013.28 ◽

2020 ◽

pp. 192-209

Author(s):

Mads Dagnis Jensen ◽

Peter Nedergaard

Keyword(s):

Political System ◽

Decision Making Process ◽

The European Union ◽

Eu Member States ◽

Eu Legislation ◽

Coordination System ◽

Set Up ◽

High Degree ◽

Over Time ◽

The Eu

The Danish EU coordination system is set up to secure a consensus-oriented and consistent positioning of Denmark in the EU decision-making process. It was established in connection with Danish membership in 1973, but it has roots that go further back. Over time, the Danish coordination system has undergone changes with increased decentralization to the sectoral ministries, through parliamentarization, and via increased transnationalization with linkages to the administrations in the EU and other EU member states. The system secures that the negotiators have a high degree of credibility in the eyes of other delegations, and it ensures a high score when it comes to implementation of EU legislation in Denmark. However, it also has some disadvantages. The key coordination lens in the form of the European Affairs Committee of the Danish Parliament is overloaded, and it is often involved too late in the Brussels negotiations. All in all, the Danish EU coordination system corresponds to the way the Danish political system works in other venues.

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The importance to financial information in the decision-making process in company’s family structure

Contaduría y Administración ◽

10.22201/fca.24488410e.2018.1727 ◽

2018 ◽

Vol 63 (2) ◽

pp. 38 ◽

Cited By ~ 1

Author(s):

Joana Patrícia Friães dos Santos ◽

Amélia Maria Pires ◽

Paula Odete Fernandes

Keyword(s):

Decision Making ◽

Balance Sheet ◽

Investment Decisions ◽

Financial Statements ◽

Financial Information ◽

Financial Impact ◽

Decision Making Process ◽

Current Management ◽

Family Pattern ◽

Income Statement

In Portugal most enterprises have a family pattern and an important role. Its importance is recognized and justifies the option to develop this research, which aims to determine whether these enterprises assign importance to financial information in the decision-making process. The work allowed gathering enough evidence to conclude on the importance of financial statements for the decision-making process, in particular as regards the use of the balance sheet and income statement. It was also concluded that financial information is primarily used to assess the financial impact, support the current management, investment decisions and comply with tax obligations.

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