The effect of earnings forecast precision on firm value and insider trading under voluntary disclosure in Taiwan

Taiwan changed its earnings forecast policy from mandatory to voluntary disclosure in 2005. In this study, the inferences of voluntary earnings forecast are examined based on forecasts issued by listed firms. This study suspects that insiders have a temptation to strategically manipulate financial forecast information to influence markets and thus receive extra rents. Under the new earnings forecast disclosure policy, the number of disclosing firm decreases but the precision of earnings forecast increases. The empirical result from dynamic panel data evidences the forecast error of voluntary disclosure may negatively impact firm values. Furthermore, there is a positive relationship between insiders＇ trading profit and manipulation of earnings forecasts. As volatility in insider manipulation increases, it is difficult for the investors to predict the real intention of insiders, and insiders may achieve greater benefits from trading. This study also observes that many listed companies hold investor conferences to provide earnings guidance in Taiwan. The reason may be that investor conference is more flexible and has less forecast error cost than the formal financial forecast. This study provides important insights into earnings forecast policy in emerging markets. The competent authority should improve corporate governance and develop monitoring functions to abate forecast manipulation.     

Are Islamic incomes relevance to commercial banks in Malaysia？

A significant price-to-earnings relation is evident in many research findings, which includes study on Malaysia Stock Markets, that the strength, consistency and magnitude of the relation are not as large as those reported in institutionally more developed markets. However, the price adjustment is stronger if price reaction is measured over a long periods, which is consistent to speculative trading. Firm-specific variables such as revenue, firm size and debt-equity have no incremental information content beyond earnings implies that the market monitoring process in an emerging market focuses on earnings only during financial announcement. Therefore, this paper revisited the study on the relevant of accounting banks in Malaysia using the earnings response coefficients, earnings by looking at Islamic Income for commercial which are the earnings-to-share return coefficients that are estimated for sub earnings components by including Islamic banking incomes in the analysis. This paper discovered that though there is a positive effect, the earnings from Islamic banking operation are small. Thus, the total earnings as well as the sub-categories of earnings of banks appear to enter the pricing considerations of investors.     

Private equity investment return analysis based on the earning persistence and trading strategy of new economic enterprise

For the purpose of analyzing the private equity investment return, this paper investigates the extent to which current earnings performance persisting into future depends on the components of earnings, and tries to find out whether stock price reflects the information of earnings. Comparing to accrued components of earnings, cash flow components of earnings has more explanatory ability for abnormal returns and with higher persistence, especially for new economic industry. Eventually we find that investors＇ inability to distinguish correctly among the components of earnings. Constructing a portfolio based on the magnitudes of accrued components of earnings, we can earn 4% to 13% of excess returns for new economic industry and general industry.     

The accounting valuation of bank stocks in Europe

In this study we examine the validity of the earnings-book value capitalization model in the pricing of bank stocks in Europe. We perform cross-sectional tests using a sample of banks operating in 21 European Union countries. We split our sample into code and common law countries to control for the influence of the financial reporting system upon the pricing of earnings and book value. Our empirical findings suggest that disaggregating total reported clean surplus income into reported gains and losses from securities and other income increases the explanatory power of the accounting valuation model. Indeed, reported gains and losses from securities are priced lower than other income, irrespective of whether the financial reporting system is classified as a code or a common law system, probably because the market considers the former as a less stable source of income. Additionally, we observe that the pricing of both earnings and book value is influenced by the financial reporting system. We conclude that earnings announced under a common law financial reporting system are priced differently from those reported under the respective code law system. Finally, we provide evidence that comprehensive and dirty surplus income are two value relevant variables for banks reporting earnings under the code law system, although dirty surplus income is priced lower than clean surplus income.     

How value relevant are earnings when they are transitory？ Empirical evidence for France

Capital market participants take seriously into consideration the value relevance of earnings for security valuation. This study examines the value relevance of earnings when earnings are transitory, i.e., there is great variability in earnings. It hypothesizes that the relationship between earnings and security returns worsens when earnings are transitory and this robustness is country specific. The dataset consists of more than 1,100 French firm-year observations over a nine year period. Empirical results show that when earnings are transitory, investors pay more attention to operating cash flows and less attention to earnings, a result indicating that investors penalize firms with unstable earnings. These results should be of great importance to financial analysts, investors and bankers for investing and credit decisions, especially after the recent global financial crisis.     

Value-relevance of accounting numbers for valuation

Recent empirical work suggested that the ability of accounting numbers to explain the relationship between accounting numbers and stock prices has deteriorated over the past four decades. The findings of this study suggest that the accounting earnings and book value are capturing most of the information that is relevant to assess the values of firms. At the same time, it also suggests that earnings and book value as well as non-accounting beta are more valued during the financial crisis as compared to after the financial crisis. Overall, the accounting estimate of the value of the firm is not deviating from the markets＇ estimate, which suggests that accounting numbers play an important role in the valuation of firms in Malaysia.     

The Role of Comprehensive Income as Financial Performance Predictor： Panel Evidence From Italy

The aim of this study is to investigate whether the comprehensive income （CI） and its individual components are useful in assessing the future cash flows for Italian listed companies. In addition, we verify whether the recent requirement of International Accounting Standard （IAS） 1 （r2011） of providing the other comprehensive income （OCI） separates in two sub-totals （recycling and non-recycling items groups） is useful to explain the expected cash flows. We consider a sample of 121 Italian non-financial companies listed on the Italian Stock Exchange for the testing period of 2008-2011, employing a fixed-effect regression model, and we test the relationship between the changes in the variables considered and not the relative absolute value reducing, in this way, the risk of not grasping a report if the independent variable and the response variable do not have the same sign. Our results stress that CI and the two new sub-aggregates are not relevant to explain future cash flows, while net income （NI） and OC1 as a whole seem to be more relevant to make explicit the future financial position. The study contributes, as a sort of post-implementation review, to the current debate on the ability of Cl to predict the future cash flows and on the real usefulness of the CI and the sub-aggregate identified by the IAS 1 revised as well.     

The impact of European firms＇ economic conditions and financial performance on accounting quality

In this study the authors analyse the possible effect of firms＇ economic conditions and financial performance on accounting quality. Bradshaw, et al. （2004）, Gelos ＆ WEI （2005） stated that financial reporting quality is fundamental for investors and it affects international capital movements. Following Schipper ＆ Vicent （2003）, the authors estimated accounting quality by abnormal accruals and earnings persistence. The authors＇ contribution consists of investigating a huge number of firms from 17 European countries using unbalanced panel data. The authors found evidence that economic conditions affect accounting quality： big firms and those with high current earnings exhibit better financial information. These results are robust because they do not depend on the accounting quality proxy, even when the authors estimated regression with economical and financial factors alone or together. Financial performance does not seem to affect accounting quality. However, this relation is not linear because in high leveraged firms, the capital structure becomes determinant.     

An empirical study on information content of accounting earnings and cash flow

Based on deep analyzing the colluding and checking relation of income statement and cash flow statement, this paper chooses and designs the corresponding profit index, carries on the comparative study of information content between accounting earnings and cash flows. The paper utilizes the financial data of Chinese listed company in manufacturing industry from 2003 to 2005, adopts the price model and analyzes empirical study about two kinds of profit indexes and value relevance. Studies have suggested： accounting earnings and cash flows all have relevant relations to stock prices; however, the relevance between cash flow and stock price is stronger, and cash flows have higher information quality.     

Missing quarterly earnings benchmarks, CEO cash compensation and institutional ownership

Research suggests that transient institutions, i.e., institutions with short-term investment horizon,make management focus on short-term earnings goals. This study examines incentive in terms of CEO cash compensation that explains why management concentrates on short-term earnings results when transient institutions hold high levels of ownership. Using quarterly consensus analysts＇ expectations as a proxy for short-term earnings benchmarks, the author finds that CEO cash compensation and the frequency with which management misses quarterly earnings benchmarks in a year （MISSNUMt） are more strongly negatively associated in firms with high transient institutional ownership than in firms with low transient institutional ownership, suggesting that transient institutions strengthen the inverse relation between CEO cash pay and missing short-term earnings benchmarks and hence increase pressure on management in terms of cash pay for short-term results. Moreover, the author shows that change in CEO cash compensation is positively associated with change in transient institutional ownership, consistent with the idea that selling shares by transient institutions influences the boards of portfolio firms in CEO cash compensation decision. This study contributes to the governance literature and is relevant to business managers by providing additional evidence that transient institutions provide less patient capital and may not benefit long-run firm value creation.     

The Terminal Value （TV） Performing in Firm Valuation： The Gap of Literature and Research Agenda

The uncertainty about the future of firms must be modeled and incorporated in the valuation of enterprises outside the explicit period of analysis, i.e., in the continuing or terminal value （TV）. There is a multiplicity of factors that influence the TV of firms which are not being considered within current evaluation models. This aspect leads to the incurring of unrecoverable errors, thus leading to values of goodwill or bad will far away from the substantial value of intrinsic assets. As a consequence, the evaluation results will be presented markedly different from market values. There is no consensus in the scientific community about the method of computation of the TV as a forecast in an infinite horizon. The size of the terminal, or non-explicit period, assumed as infinite, is never called into question by scientific literature, or the probability of business bankruptcy. This paper aims to promote a study of the existing literature on the TV, to highlight the fragility of the evaluation models of companies that have been used by the academic community and by financial analysts, and to point out lines for future research to minimize these errors.     

Prediction Ability of Cash Flows,Net Income （NI）, and Auditors

The accounting information should help investors and creditors evaluate the amounts, timing, and uncertainty of firms＇ future cash receipts and disbursements. The Financial Accounting Standards Board （FASB） contends that accrual-based historical earnings are superior to cash flows in predicting future cash flows. But, Bowen, Burgstahler, and Daley （1986） showed that traditional measures of cash flows （net income （NI） plus depreciation and working capital from operations） appear to be better predictors of future cash flows than accrual accounting earnings. Since then, many researchers have articulated the importance of accounting data, especially cash flows and NI, in the predictive and forecasting processes. In this study, we empirically re-examined the ability of cash flows from operating activities （CFO） and accrual-based NI in predicting firms＇ bankruptcy. In the past, the results of this type of research were mixed. Differently from previous research, we focus on the timing of predictive ability, i.e., which indicator, cash flows or NI, is faster in predicting a firm＇s bankruptcy. We also investigate the timing of auditors＇ issuance of a going-concern opinion. The preliminary results show that the accrual-based NI is more accurate and faster than either CFO or audit opinion in predicting firms＇ failures. On average, NI signals a firm＇s bankruptcy 2.41 years before the bankruptcy filing, while CFO signals 1.48 years before filing. Auditors issued a going-concern opinion, another signal for firms＇ failure, to only 16 out of 41 bankrupt firms one year before bankruptcy, and no auditor issued the going-concern opinion two years before bankruptcy.     

英文摘要

Study on the Change of Influence on Accounting Information Value of Comprehensive Income Reporting Mode
Comprehensive income reporting mode changes will affect the use of fair value. The comprehensive income reporting system based on the mode change, introduced the concept of comprehensive income and its presentation of the impact on the financial report, the financial report on the quality of the status of accounting information. Aiming at the lack of reporting effect on valuation of comprehensive income information and empirieal research, this paper reported from the analysis of comprehensive income to improve investor perception, improve investor valuations and strengthen financial supervision of the constructed model, value and benefits related to model validation policy change effect. Results show that the increase in the income statement, profit and loss information will enhance the value of accounling information, can significantly improve the transparency of financial reports and significantly reduce investors valuation cost, provides the reference for the formulation of accounting standards and improve the quality of accounting information.     

Double Misplaces of SOE＇s Ownership and the Loss of Claim Rights

Modem enterprise theory defines onterprise＇s ownership through the concepts of residual rights of control and claim to residue. It also believes that when they are in homologous, the ownership of enterprise can be arranged in the best place. When the enterprise is under normal run, shareholders are its owner, but when it goes into bankruptcy, claimers should take place of shareholders becoming the owner of the enterprise. But in China, the ownership of state-owned enterprise （SEE） goes into double misplaces. Management controls the enterprise under the normal run, which leads salaries to seize the earnings and share equities. The state who acts as the shareholder not only lessens investments but also fixes its earnings as much as possible. It gives up the claim to residue, which leads claimers to bear the enterprise＇s residual risks （when the residual income is negative）. When the enterprise goes into bankruptcy, as the shareholder, the state determines whether it can exist or not in order to maximize its own utility. Rights of claimer are being seriously damaged as they can be manipulated freely in the enterprise. Banks＇ bad debts are also in an extremely high level. In this article, the author will establish a model and use the relative data to do technical analysis.     

Study on the environmental information disclosure of Chinese forestry enterprises

Environmental accounting is a kind of accounting which focuses on the compensation for the resources spending. It combines the theories of environmental economics and traditional accounting and uses scientific as well as systematic ways to coordinate the development of economics and the protection of environment. It is just in the primary process for forestry enterprises in China to introduce the research and practice of environmental accounting. Based on discussion about the principle of environmental information disclosure and analysis on the current situation of the environmental information disclosure of the forestry enterprises, this paper attempted to propose that the supplementary report mode of information disclosure should be appropriate for the forestry enterprises, which provide the balance sheet of environment, the income statement of environment besides the original three financial report to reflect the general environmental information of the enterprise.     

State Auditing With the Investment in Public Sector： Case of Vietnam

In Vietnam, in the current period, public investment plays an important role in the improvement of technical infrastructure systems, economic and social development of motivation to promote national development. However, the question is how to ensure that these sources of funds are used most effectively in terms of limited resources. In this article, the author would like to emphasize the critical role of the state auditor which is not only in the transparency of information, in enhancing the trust of the citizens, but also in providing important and reliable information to the public sector agencies, units, investors, and people in the society. From that, it could help to serve the management and administration of revenues and expenditures of the state budget as well as reasonably and efficiently using financial resources and assets. In case of perfectly conducting those tasks, they will contribute the power to the economy, fight corruption as loss or waste, and detect and prevent violations of law; improve the efficient use of the budget, the money, and property of the state; and serve effectively for the operation of the National Assembly and People＇s Councils at all levels of the implementation and monitoring function to decide important issues of national and local governments. With the above information, these matters in Vietnam will be solved through this paper that consists of five parts： （1） the basics about the current public investment in Vietnam; （2） the role of state auditing in improving performance management and monitoring of investment; （3） the limitations of state auditing in public investment; （4） many solutions to promote the role of state auditing in improving the effective investment activities; and （5） conclusion.     

Measuring the Impact of Information Technology （IT） on Supply Chain Management （SCM） Through Indicators： An Exploratory Study

Enterprises are looking to adapt to this scenario focusing on performance, seeking to improve the level of service and reduce costs in an attempt to differentiate and increase the perceived value of their customers. A strong partner to achieve these goals is the information technology （IT）. IT has an important role in the performance of companies, providing a flow of information that makes the supply chain more robust and resilient, without compromising efficiency. To achieve the objective of this research, a survey of the literature on the four models was studied and then a field research with professionals was conducted in the areas of IT and supply chain management （SCM） of various companies of Sao Paulo. To collect the data needed for analysis, we used the exploratory research of a qualitative nature. Thus, we conclude that the use of IT impacts supply chain in five surveyed areas as planning, manufacturing, suppliers, customers, and delivery but does not impact the return area.     

Do auditors perform governance functions？ A research on the change of performance notice

Whether auditors provide high-quality audit services has been a concern of academics for a long time, but it has not clear answer. In this paper the author studies this problem from the real basis of audit activities, in view of an endless stream of the performance of listed companies notice ＂change＂ phenomenon. The author finds that auditing is the important reasons of listed companies notice ＂change＂, auditor can improve disclosure quality, is the gatekeeper to accounting information. The author also finds that there may be exist collusion of listed company with auditor, SEC should enhance inspection of the implementation of listed companies notice of earnings.     

Impact of IFRS adoption on accounting quality in European firms

In this paper it is examined whether firms following International Financial Reporting Standards （IFRS） exhibit higher accounting quality. While IFRS are supposed to improve international comparisons by harmonisation and definition of strong principles, Ball （2006） and Nobes （2006） were concerned about differences in the application of IFRS cross-countries and firms. Barth, Landsman ＆ Lang （2008） stated that the flexibility of principles- based International Accounting Standards （IAS） could create incentives for firms to manage earnings. This paper contributes to analyse the impact of IFRS on accounting quality for European firms. The findings show that for firms in the European Union （EU） IFRS produce a negative effect on accounting quality that continues after 2005, when IFRS becomes mandatory. By contrast, for European firms which are not EU members the IFRS adoption increases accounting quality. These results support the concerns about IFRS application and flexibility and indicate that accounting quality does not improve just because the adoption of IFRS is mandatory.