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Accounting diversity and firm valuation

The International Journal of Accounting, 1998, Vol.33 (5), p.529-567 [Peer Reviewed Journal]

1998 ;Copyright JAI Press Inc. 1998 ;ISSN: 1094-4060 ;ISSN: 0020-7063 ;EISSN: 2213-3933 ;DOI: 10.1016/S0020-7063(98)90012-7

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  • Title:
    Accounting diversity and firm valuation
  • Author: King, Raymond D. ; Langli, John Christian
  • Subjects: Accounting diversity ; Accounting firms ; Accounting procedures ; Accounting records ; Accounting systems ; Attitude surveys ; Bias ; Book value ; Business valuation ; Capital assets ; Clean surplus ; Conservatism ; Dividends ; Earnings per share ; Estimates ; International ; International accounting standards ; Market prices ; Regression analysis ; Stock prices ; Studies ; Valuation
  • Is Part Of: The International Journal of Accounting, 1998, Vol.33 (5), p.529-567
  • Description: We examine accounting numbers and stock prices across three countries: Germany, Norway, and the United Kingdom (UK). The accounting systems in the three countries differ in faithfulness to clean surplus accounting and in conservatism. We address three questions. First, are there systematic differences across countries in the value relevance of accounting? Second, are there systematic differences in the incremental and relative value relevance of book values and earnings per shape (EPS) across the countries? Third, do future earnings realizations (proxies for expected earnings) explain current stock prices? We find that accounting book value and EPS are significantly related to current stock prices across all three countries. German accounting numbers have the lowest relation with stock prices (R 2 ≈ 40%) and UK accounting numbers the highest (R 2 ≈ 70%), while Norwegian accounting numbers are in between (R 2 ≈ 60%). Second, the incremental and relative explanatory power of book value and of EPS differs across time and across countries. Book values explain more than earnings in Germany and Norway, but less in the UK. Finally, future income realization explain little about market prices not already explained by current book value and EPS.
  • Publisher: London: Elsevier Inc
  • Language: English
  • Identifier: ISSN: 1094-4060
    ISSN: 0020-7063
    EISSN: 2213-3933
    DOI: 10.1016/S0020-7063(98)90012-7
  • Source: Alma/SFX Local Collection
    RePEc
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