Effect of fair value accounting on the company's reputation

  • Authors

    • Olfa Riahi Faculty of Economics and Management of Sfax - Tunisia
    • Walid Khoufi
    2016-03-31
    https://doi.org/10.14419/ijaes.v4i1.5956
  • Fair Value, Historical Cost, Value Relevance, Value Creation.
  • Abstract

    The purpose of this paper is to study in the French context the impact of the application of fair value on the shareholder value creation by comparing the information’s relevance of accounting indicators of French corporate groups in the industrial sector included in the CAC All-Tradable between pre-fair value period (2001-2003) and the post-fair value (2005-2007). Using the method of logistic regression permits us to demonstrate, firstly, that the variables of traditional character still retain their rank as key indicators determining stock return whatever the accounting principle relating thereto, and we noticed, on the other hand, that there is a marked improvement in information content of variables if and only they were submitted as understandable and uncomplicated under the model of fair value.

  • References

    1. [1] Ahmed, A-S. and Takeda C. (1995), “Stock market valuation of gains and losses on commercial banks’ investment securities: an empirical analysis », Journal of Accounting and Economics, vol. 20, pp. 207-225. http://dx.doi.org/10.1016/0165-4101(95)00396-Z.

      [2] Ball, R. and Brown P. (1968), “An empirical evaluation of accounting income numbersâ€, Journal of Accounting Research, autumn, pp 159 – 177.

      [3] Barth, M-.E. And Clinch G. (1998), “Revalued financial, tangible, and intangible assets: associations with share prices and non-market-based value estimatesâ€, Journal of Accounting Research, vol. 36, pp. 199-33. http://dx.doi.org/10.2307/2491314.

      [4] Barth, M- E., Landsman W. R. and Lang M. H. (2008), “International Accounting Standards and Accounting Qualityâ€, Journal of Accounting Research, vol. 46, n°3, pp.467-498. http://dx.doi.org/10.1111/j.1475-679X.2008.00287.x.

      [5] Barth, M., Beaver W. and Landsman W. (2001),†the value relevance literature for financial accounting standard setting: another viewâ€, Journal of Accounting and Economics, vol.31, pp. 77-104. http://dx.doi.org/10.1016/S0165-4101(01)00019-2.

      [6] Barth, M., Landsman W. and Wahlen J.M.( 1995), “Fair value accounting: effects on banks’ earnings volatility, regulatory capital, and value of contractual cash flowsâ€,Journal of Banking and Finance, vol.19, no 3, pp. 577-605. http://dx.doi.org/10.1016/0378-4266(94)00141-O.

      [7] Barth, M-E. (1994), “Relative measurement errors among alternative pension asset and liability measuresâ€, The Accounting Review, vol. 66, issue 3, pp. 433-463.

      [8] Barth, M-E. (2004), “Fair Values and Financial Statement Volatilityâ€, in the Market Discipline across Countries and Industriesâ€, Edited by Claudio Borio, William Curt Hunter, George G. Kaufman and Kostas Tsatsaronis, Cambridge, MIT Press.

      [9] Barth, M-E. , Beaver W-H. and Landsman W R. (1996), “Value-Relevance of banks’ fair Value Disclosures under SFAS Nâ—¦.107â€, The Accounting review, vol. 71,nâ—¦4, pp. 513-537.

      [10] Bartov, E., Goldberg S. and Kim M. (2005), “Comparative value relevance among German, US, and International Accounting Standards: A German stock market perspectiveâ€, Journal of Accounting, Auditing & Finance, vol20, pp.95-119.

      [11] Beaver, W. (1998), “Financial reporting: an accounting revolutionâ€, prentice Hall, Upper saddle river, Contemporary topics in accounting series, 3ème éd.

      [12] Beaver, W-H. (1968), “The information content of annual earnings announcementsâ€, Journal of Accounting and Research, Vol. 6, n°3, supplement, pp 67 – 92. http://dx.doi.org/10.2307/2490070.

      [13] Carroll, T-J., Linsmeier T-J. and Petroni K.R. (2003) ,â€The reliability of fair value versus historical cost information: evidence from closed-end mutual funds “, Journal of Accounting, Auditing and Finance, vol. 14, winter, pp. 1-23.

      [14] CASTA, J-F. (2003), « La comptabilité en juste valeur permet-elle une meilleure représentation de l'entreprise ?, Juste valeur et évaluation des actifs », Revue d’Economie Financière, Paris, n°71, pp. 17-31.

      [15] Casta, J-F. and Colasse B. (2001), « Juste Valeur : enjeux techniques et politiques », Economica.

      [16] Cazavan-Jeny, A. (2003), « Le ratio market-to-book et la reconnaissance des immatériels: une étude du marché français », CD Rom du 24ème congrès de l’AFC, mai.

      [17] Chen, S. and Dodd J-L. (1997), “Economic Value Added (EVA): An Empirical Examination of a New Corporate Performance Measureâ€. Journal of Managerial Issues (fall), pp. 318-333.

      [18] Christensen, H., LEE E. and WALKER M. (2009), “Do IFRS reconciliations convey information? The effect of debt contractingâ€, Journal of Accounting Research, vol.47, pp.1167-1199. http://dx.doi.org/10.1111/j.1475-679X.2009.00345.x.

      [19] Collins, D. and Kothari S. (1989), “A theoretical and empirical analysis of the determination of earning response coefficients “, Journal of Accounting and Economics, vol. 11, pp. 143-181. http://dx.doi.org/10.1016/0165-4101(89)90004-9.

      [20] Dechow, P-M. (1994), “Accounting earnings and cash-flows as measures of firm performance: the role of accounting accruals “, Journal of Accounting and Economics, vol.18, pp. 3-42. http://dx.doi.org/10.1016/0165-4101(94)90016-7.

      [21] Desmoutier, H. (1994), « La contribution de la théorie financière à la stratégie et vice versa », Cahier de recherche de l’ESUG, Toulouse.

      [22] Dumontier, P. and Raffournier B. (1998), “Why firms comply voluntarily with IAS: An empirical analysis with Swiss dataâ€, Journal of International Financial Management and Accounting, vol. 9, no 3, pp. 216-245. http://dx.doi.org/10.1111/1467-646X.00038.

      [23] Easton, P. and Harris T. (1991), “Earnings as an explanatory variable for returns “, Journal of Accounting Research, vol. 29, n° 1, 99. 19-35.

      [24] Eccher, E A., Ramesh K. and Thiagarajan H. (1996), “Fair value disclosures by bank holding compagniesâ€, Journal of Accounting and Economics, vol. 22, pp.79-117. http://dx.doi.org/10.1016/S0165-4101(96)00438-7.

      [25] Ewert, R. and Wagenhofer A. (2005), “Economic effects of tightening accounting standards to restrict earnings managementâ€, The Accounting Review, 80, 1101 – 1124. http://dx.doi.org/10.2308/accr.2005.80.4.1101.

      [26] Gorchakov, I. (2009), “paper profits: the role of fair value accounting in dividend policyâ€, Amsterdam business school, September.

      [27] Hamdi, B. and Elabidi H. (2009), « l’information comptable en juste valeur : quelle utilité pour les investisseurs ?, La place de la dimension européenne dans la Comptabilité Contrôle Audit, Strasbourg.

      [28] Harris, T., Lang M. and Möller H. (1994), “The value relevance of German accounting measures: an empirical analysisâ€, Journal of Accounting Research, Vol. 32, N°2, autumn, pp 187 – 209.

      [29] Hassan, MS., Percy M. and Stewart J. (2006), “the value relevance of fair value disclosures in australian firms in the extractive industriesâ€, Asian academy of management journal of accounting and finance (AAMJAF), Vol. 2, No. 1, pp.41–61.

      [30] Jacquet, D. (1997), « Rentabilité et valeur : EVA et MVA », Analyse Financière, n°112, septembre, pp.52-62.

      [31] Jeanjean, T. and Stolowy H. (2008), “Do accounting standards matter? An exploratory analysis of earnings management before and after IFRS adoptionâ€, Journal of Accounting and Public Policy, vol.27, n° 6, pp.480-494. http://dx.doi.org/10.1016/j.jaccpubpol.2008.09.008.

      [32] Juettner-Nauroth, B. (2003), “Problems associated with the Value-Relevance of Financial Derivatives according to IAS 39â€, SSE/EFI Working Paper Series in Business Administration, n°2003 -2.

      [33] Khuarana, I-K. and Kim M-S. (2003), “Relative value relevance of historical cost vs. fair value: evidence from bank holding companies », Journal of Accounting and Public Policy, vol. 22, n° 1, pp. 19-42. http://dx.doi.org/10.1016/S0278-4254(02)00084-4.

      [34] Koch, S. and Trémolières R. (1995), « Evaluation économique et stratégique de l’entreprise : évolution et nouvelles tendances », Analyse financière, septembre, n°104, pp.75-84.

      [35] Kothari, S. (1992), “Price-earnings regressions in the presence of prices leading earnings: earnings level versus change specification and alternative deflators “, Journal of Accounting and Economics, vol. 15, pp. 173-202. http://dx.doi.org/10.1016/0165-4101(92)90017-V.

      [36] Landsman, W. and Maydew E. (1999), “Beaver (1968) Revisited: Has the information content of annual earnings announcements declined in the past three decades? », Working paper, University of North Carolina.

      [37] Lev, B. and Zarowin P. (1999), “The boundaries of financial reporting and how to extend themâ€, Journal of Accounting Research, autumn, pp. 353-385. http://dx.doi.org/10.2307/2491413.

      [38] Martinez,I. (2004), « le contenu informatif des chiffres comptables : vers de nouvelles amélioration méthodologiques » Comptabilité, Contrôle, Audit. Tome 10, vol.2, pp. 9-30.

      [39] Mather, P-R. and Peasnell K-V. (1991), “An examination of the economic circumstances surrounding decisions to capitalize brands “, British Journal of Management, vol. 2, pp. 151 164. http://dx.doi.org/10.1111/j.1467-8551.1991.tb00023.x.

      [40] Nelson, K. (1996), “Fair value accounting for commercial banks: an empirical analysis of SFAS n°107â€, The Accounting Review, vol. 71, n° 2, avril, pp. 161-182.

      [41] Parienté, S. (1997), « La création de valeur par l’entreprise », Analyse Financière, n°112, septembre, pp.63-72.

      [42] Park, M., Park T. and Ro B. (1999), “Fair value disclosures for investment securities and bank equities: evidence from SFAS N° 115â€, Journal of Accounting Auditing and Finance, vol. 14, n° 3, pp. 347-370.

      [43] Ramond, O., Batsch L. and Casta JF. (2007), « Résultat et performance financière en normes IFRS : Quel est le contenu informatif du comprehensive income ? », Research paper n° 2007-04, Université Paris Dauphine.

      [44] Saadi, T. (2010), « Création de valeur : l’impact des normes IFRS sur le contenu informationnel du résultat net : le cas de la France », CESAG.

      [45] Saadi, T. (2010), « contenus informationnels du résultat net et des capitaux propres : quelle pertinence après l’introduction des normes IFRS : le cas de la France », CESAG (centre d’études des sciences appliquées à la gestion), école de management Strasbourg, université de Strasbourg.

      [46] Schrand, C. (1997), “The association between stock-price interest rate sensitivity and disclosures about derivative instrumentsâ€, The Accounting Review, vol. 72, n° 1, janvier, pp. 87-109.

      [47] Venkatachalam, (1996), “Value relevance of banks’ derivatives disclosuresâ€, Journal of Accounting and Economics, pp.327-355. http://dx.doi.org/10.1016/S0165-4101(96)00433-8.

  • Downloads

  • How to Cite

    Riahi, O., & Khoufi, W. (2016). Effect of fair value accounting on the company’s reputation. International Journal of Accounting and Economics Studies, 4(1), 36-45. https://doi.org/10.14419/ijaes.v4i1.5956

    Received date: 2016-02-28

    Accepted date: 2016-03-20

    Published date: 2016-03-31