Table 3 - uploaded by Greg Clinch
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reveals that the distributions of our simulated variables resemble those of
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Based on data simulated using a modified Ohlson (1995) valuation model, we investigate effects on inferences of five potential scale-related effects: multiplicative and additive omitted scale factors, scale-varying coefficients, survivorship, and heteroscedasticity. We find that diagnostics identified in prior research are not successful in detecti...
Context in source publication
Context 1
... samples form the basis for our investigation. Table 3 presents descriptive statistics for Compustat firms and for our simulated variables when characterizing scale effects as net dividends. For the simulated data, statistics across the columns are cross-sectional statistics for one repetition, and statistics down the rows are across the 500 iterations. ...
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Citations
... The first is related to financial information, while the second to firm's ESG data. According to prior studies related to firm's market value, we used financial information as book value per share and share price (Barth & Clinch, 2009;Lee et al., 2014;Ohlson, 1995). Moreover, we considered other data like total assets, return on equity (ROE), earnings before interest and taxes (EBIT), earnings per share (EPS), and market index price. ...
In recent years, environmental, social, and governance (ESG) practices and disclosure has become a critical component of corporate finance and accounting. Indeed, increasingly, companies seek to demonstrate their accountability to the environment and society in order to meet the expectations of different stakeholders interested in ESG performance (Garcia-Sanchez & Garcia-Sanchez, 2020). Customers, regulators, employees, suppliers, social and activist groups, media and lenders are all potential stakeholders in sustainability accountability (Arif et al., 2021; Camilleri, 2015; Sajjad et al., 2020). Nevertheless, the shareholders, institutional investors and individuals, looking to invest their money in firms with sustainable finance goals and high levels of ESG performance (Lourenço et al., 2014). Companies are supposed to make and disclose sustainable initiatives in organizational decisions (Garcia-Sanchez et al., 2014) and managers convey the focus of their efforts towards a more sustainable environment and society paying much attention to ESG indicators (Broadstock et al., 2019). This paper investigates the value of ESG score for family firms (FF) and non-family firms (NFF). Stemming from previous studies (Martínez-Ferrero & Frías-Aceituno, 2015), ESG performance in family business context is still unexplored. Indeed, most of the scholars have focused their effort on exploring the adoption of FF’s non-financial disclosure while, to the best of our knowledge, no one has investigated the effect of the type of firm (family or non-family) in the relationship between non-financial performance (ESG) and financial performance. The results of the analyzes demonstrate that there is no significant relationship between non-financial performance (ESG performance) and the value of companies. Indeed, for both the hypotheses there is just a positive but non-significant correlation. This evidence was verified for both FF and NFF panel.
... However, in the benchmark regression results, we found that the market value of the corporate (Tobin Q) was significantly negative to the coefficient of ESG. Although most studies have shown that there is a mutually reinforcing effect between corporate ESG and corporate value [57,58], some scholars have also found that the higher the corporate value, the worse the ESG performance [59,60]. Di Giuli and Kostovetsky (2014) [61] also show that ESG performance is negatively correlated with corporate values, as "any benefit that social responsibility brings to stakeholders comes directly at the expense of corporate value." ...
Public procurement is an important bridge between public demand and market supply and may affect corporate behavior. However, in the advocacy of sustainable development, the extant research has rarely combined sustainable public procurement (SPP) with corporate ESG performance, to explore whether governments have contributed to the development of sustainable corporate performance through their sustainable procurement activities. This paper fills in the gap by matching the actual implementation of SPP of 42,369 projects in China over 2015~2020 with 20,125 corporate ESG performance data, to analyze the relationship between SPP implementation and corporate ESG performance. The results show that the implementation of SPP has a significant positive impact on corporate ESG performance. Further heterogeneity analysis reveals that the impact is stronger in China’s eastern and central regions than in other regions, and corporates at a mature stage are more likely to follow the government sustainable behavior. In addition, the implementation of SPP has a long-term effect on corporate ESG performance. The above findings have important policy implications: firstly, there is a better role for government to play as the “invisible hand”, to participate in the market economy; Specifically, SPP policy should be added to government policy tool box to improve corporate ESG performance in addition to disclosure requirement, and the SPP policy employed should in particular attend to the “missing sectors” of sustainability in SPP for the good of corporate ESG; secondly, the government should implement differentiated policies tailored to the region’s economic development conditions and corporate development characteristics; thirdly, a long-term evaluation mechanism should be established so that the government can play a more long-term demonstration and leading role.
... It should be noted that we use the specification "per share" in accordance with most prior studies in this research field (Tsalavoutas and Dionysiou, 2014;Boukardous and Rimmel, 2014;Alfraih and Alanezi, 2015;Elbakry et al., 2017). In this connection, Barth and Clinch (2009) conduct a comparison of six alternative estimation specifications for Ohlson's (1995) model (undeflated, share-deflated, returns, lagged price-deflated, equity book value-deflated and equity market value-deflated). They reveal that using "per share" specifications leads to less biased and more consistent estimations of the coefficients' p-values as well as the model explanatory power. ...
... Second, according to Barth and Clinch (2009), the share-deflated specification and, to a lesser extent, the non-deflated specification tends to be the most effective, especially in the presence of the scale effects. To perform this specification the dependent variable and the book values are changed to be expressed in millions of Canadian dollars. ...
Purpose
This paper aims to test whether the extent of compliance with International Financial Reporting Standards (IFRS) 7 requirements is value relevant and whether it influences the value relevance of the firm's accounting information (book value of shareholders' equity and net income).
Design/methodology/approach
The sample for this paper consists of 288 financial institutions listed on the Toronto Stock Exchange (TSX) from 2016 to 2019. Panel regressions have been used in this study.
Findings
The findings reveal that compliance with IFRS 7 is positively associated with the firm's market value. After making a classification between high-compliance and low-compliance companies, the authors' results indicate that the compliance level is positively associated with the value relevance of net income. Surprisingly, when examining the value relevance of financial instruments disclosures (FID) supplied after the adoption of IFRS 9, the authors find that book values of shareholders' equity and earnings are not more value relevant in the post-IFRS 9 period.
Research limitations/implications
Given that the authors' analysis has been restricted to the Canadian setting, the regression results might not be generalized for other countries with different capital markets features.
Practical implications
The authors' findings point out that FID can affect investors' decisions as well as their confidence in the companies in which they invest. Hence, the regulatory bodies should gear more efforts to ensure high-compliance levels.
Originality/value
To the best of the authors' knowledge, this research is among the first attempts to investigate whether the new FID (after the adoption of IFRS 9) improves the firm disclosure quality and enhances the value relevance of accounting information.
... The first is related to financial information, while the second to firm's ESG data. According to prior studies related to firm's market value, we used financial information as book value per share, share price, and earnings per share (Barth & Clinch, 2009;Lee et al., 2014;Ohlson, 1995). Moreover, we considered other data like total assets, return on equity (ROE), earnings before interest and taxes (EBIT), earnings per share (EPS), and market index price. ...
This paper investigates the relationship between the ESG score and market values. Specifically, we test the moderating role of CSR committee defined as organizational subcommittees of boards of directors that make social and environmental recommendations to the boards of directors and support members in their CSR‐related tasks. We built a panel data set with all the listed companies in STOXX Europe 600, covering the period 2014–2020. Firms' data come from Refinitiv Eikon database which contains financial and ESG scores data of all EU listed companies. Our sample of firm‐level data contains a dataset of 600 European listed companies which are part of the STOXX Europe 600 Index. We included ESG data of STOXX Europe 600 Index components in the period 2014–2020. Our dataset contains a total of 4800 firm‐year observations. We found a negative relationship between ESG score and stock prices while the presence of CSR committee as moderating variable generates no significant evidence of ESG score. The presence of CSR committee is not considerably supporting ESG in achieving higher market performance. The CSR committee plays an essential role in monitoring management activities. This may support management practitioners in better understanding and reacting to stakeholder expectations.
... According to Ohlson (1995), we include the book value at the end of the fiscal year (BookValue it ) and the net income of the fiscal year (NetIncome it ). Both variables are di vided by the number of outstanding shares at the end of the fiscal year to address the scale effect (Barth & Clinch, 2009;Gordon et al., 2010;Song et al., 2010). To further address the scale effect, we control for Assets it , which is the natural logarithm of total assets at the end of the fiscal year (Barth et al., 1996;Gordon et al., 2010). ...
This study examines the value relevance of a firm’s artificial intelligence (AI) implementation and its awareness of the related risks. We proxy a firm’s AI implementation by AI-related disclosures and risk factors in 10-K filings to the U.S. Securities and Exchange Commission. Our results show that AI implementation disclosures in 10-K filings are more value relevant than those without AI disclosures. We also find that the disclosed AI-related risk factors are value relevant, suggesting that investors positively value a firm’s AI risk awareness. By further classifying AI risk factors by a topical analysis of the latent Dirichlet allocation, we find that investors value AI-related risk factor disclosures more regarding security and data privacy. Finally, we find that when a firm has better board- or executive-level IT governance, investors place greater value on AI-related risk factor disclosures regarding business operations.
... All variables, apart from indicator variables, are scaled by number of shares outstanding, which reliably compensates for scale effects in financial data (Barth and Clinch, 2009;Aledo Martinez et al., 2020). The result of scaling by the number of shares outstanding is that the continuous variables are effectively amounts per share. ...
Purpose
This paper aims to investigate the pricing of discretionary earnings in South Africa. This is a unique setting, as South African listed firms also report mandatory non-GAAP earnings (“headline earnings”).
Design/methodology/approach
Results are based on multivariate regression analyses for South African firms that report from 2010 to 2019.
Findings
Findings show that the value-relevance of discretionary earnings exceeds that of both GAAP earnings and headline earnings. In addition, placement of discretionary earnings reconciliations communicates information about the decision-usefulness of earnings.
Originality/value
Discretionary earnings remain the most value-relevant earnings measure, despite the divergent decision-useful characteristics offered by headline earnings and GAAP earnings. Therefore, the most decision-useful earnings reflect unique industry or firm characteristics rather than the assurance arising from regulation.
... Prior research suggests that the market-response tests could be sensitive to different scalers used to deflate earnings variables (i.e., the scaling effect; Barth & Clinch, 2009). To examine whether our results are sensitive to different scalers, we scale earnings and change in earnings using lagged market value of equity and total assets. ...
... The analysis in this paper considers the potential direct association between the market value of equity and pension earnings, assets and liabilitiesas well as the association with the core earnings, assets and liabilities (net assets). The variables in four of the five models used in this study are scaled by the number of shares as the view is taken that this mitigates scale effects more effectively than for example, book value of equity, a conclusion that is consistent with Barth and Clinch [59]. The book value of total net assets is used as the scalar in the fifth model that provides a useful comparison. ...
This study is among the first to take known results in pension accounting and use a sample of UK listed FTSE 100 companies to show that the results are mostly the same as in previous research (on the US companies) into associations between pension accounting information and firm value. We investigate the association between published pension accounting information and the market value of a sample of UK listed FTSE 100 companies in the ten-year period 2006 to 2015. We analyse UK listed firms that report under the IFRS accounting framework (IAS 19), which is a contribution to earlier literature that concentrated on US listed firms that report under the US (FASB) accounting framework that has significantly different pension accounting rules to the IFRS accounting framework. Moreover, the analysis is conducted on a sample of firms that used the method of immediate recognition of actuarial gains and losses in other comprehensive income (or the ‘Fair Value OCI method’) even before mandatory adoption of this method from 2013. We employ a static panel regression analysis on a sample of 70 companies. Empirical findings suggest that there is an association between pension accounting information and firm value, but in some cases, there is less association than there is between other types of accounting information and firm value. Core earnings are value relevant but overall pension earnings (net) are not value relevant although pension costs, pension interest expense and pension income have an association with firm value. Balance sheet numbers have less association with firm value than is the case for core earnings, pension costs, pension interest expense or pension income.
... Our tests of differences in value relevance are based on comparisons of the amount of variation explained in a regression of the valuations of private firms on their accounting numbers across various subsamples of firms, as indicated by the adjusted R 2 s from the regression. However, comparisons of adjusted R 2 s across different samples can be problematic, as differences in adjusted R 2 s may be driven by differences in scale (Easton and Sommers 2003;Gu 2007;Barth and Clinch 2009). To address this issue, we employ two alternative regression approaches. ...
We examine whether higher accounting comparability between public and private firms leads to higher value relevance of private firms’ reported financial information. To help develop our hypotheses, we conduct a series of interviews with M&A valuation experts. The experts indicate that comparable accounting between public and private firms allows them to apply public firms’ valuation multiples directly to private firms, which facilitates the use of private firms’ financial reporting in their valuations. Using a large sample of M&A transactions with private target firms in the European Union around the mandatory adoption of IFRS by public firms, we find that private firms’ reported financial information has higher value relevance when it has higher accounting comparability to that of public firms. Furthermore, we find that the impact of accounting comparability is stronger when public peer information is more precise. Our findings are consistent with higher accounting comparability facilitating a spillover of valuation information from public to private markets, which leads to greater value relevance of private firms’ reported financial information.
... To mitigate the size effects problem in the Ohlson model, all variables are scaled by the number of common shares outstanding (Barth and Clinch, 2009). Additionally, we use a 3-month window for market values to ensure that all accounting and non-accounting information is priced (Baboukardos and Rimmel, 2014). ...
In recent years, the importance of audit quality has garnered significant attention by managements, academics and the general public. In this study, we examine the relationship between Big N auditors and earnings quality in the Middle Eastern and North African (MENA) countries, where cultural and institutional contexts are quite different from those in Western countries. In addressing this issue, we employ three audit quality metrics-value relevance, abnormal accruals and earnings persistence-and use the propensity score matching technique to deal with the potential endogeneity arising from the nature of external auditor choices. Contrary to the view that Big N auditors supply quality-differentiated audits, the results obtained employing a crosscountry sample of publicly listed non-financial firms of 10 MENA countries during 2009-2019 provide evidence that Big N auditors are insignificantly associated with the three measures of audit quality. Furthermore, we find that the differences in audit quality between the two auditor groups are mainly due to the clients' innate characteristics, rather than the competency of Big N auditors. Our results hold after performing different sensitivity analyses. Overall, our findings challenge the conventional notion that Big N auditors deliver quality-differentiated audits.
