Using Forecasting Criteria to Identify Value Relevance in the Relationship Between Accounting Numbers and Market Value

We explain and demonstrate a disciplined and systematic approach to repeatable modelling using forecast criteria, in addition to the usual statistical estimation criteria, to identify value relevance in regressions of the market‐accounting relation. The method was used in Cooke et al. ( 2009 ). It is illustrated here in the case of a single firm over a 59‐year period. Market and accounting data for the U.S. firm Abbott Laboratories Inc. from 1955 are modelled using a testing‐down, error correction approach. Hold‐out samples of 10 to 15 years are used to assess forecasting performance relative to a random walk. Emphasis is placed upon the use of simple, directly observable and theory‐independent model variables that can be replicated with other sample data. In this case, logarithmic transformations of all variables have to be computed in order to achieve correct statistical specification, implying a multiplicative relationship in the raw data. The strongest cointegrating accounting variable with forecasting ability for Abbott's market value is earnings. The model parameters exhibit long‐run stability and the accounting regressor marginally improves forecasts of market value compared to a random walk, demonstrating ‘value relevance’.     

Momentum profits in the Australian equity market: A matched firm approach

This paper examines momentum trading strategies within the Australian equity market over the period 1990 to 2007, inclusive. We analyse excess returns employing both Jegadeesh and Titman's (Jegadeesh, N., Titman, S., 1993. “Returns to buying winners and selling losers: implications for stock market efficiency”. The Journal of Finance, 48:65–91) zero cost investment portfolio approach and a matched control firm approach. We also allow for short sale restrictions, liquidity constraints and transaction costs in the form of bid-ask spreads. Testing reveals that both the Jegadeesh and Titman (Jegadeesh, N., and Titman, S. (1993). “Returns to buying winners and selling losers: implications for stock market efficiency”. The Journal of Finance, 48:65–91.) zero cost investment portfolio approach and the matched control firm approach yield excess profits. While the implementation of short sale restraints increases momentum profitability, the subsequent inclusion of bid-ask spreads results in a reduction in these gains. Further, we find that executing a momentum strategy in Australia results in statistically significant dollar profits.     

The KwaZulu-Natal Income Dynamics Study (KIDS) third wave: methods,first findings and an agenda for future research

The panel study known as the KwaZulu-Natal Income Dynamics Study (KIDS) has been extended by a new wave of data collection conducted in 2004. This third wave of the study interviewed 865 households containing core adult members from 760 of the households contacted in 1993. It also conducted interviews in next-generation households that have split off from the parental households and in the current households of children who have been fostered out. The study finds that the proportion of people aged 20–44 dying between the second and third waves was nearly three times the proportion dying between the first two waves. The pattern of income distribution is one of increasing poverty and inequality since 1993, although the partial reversal of these trends in the post-1998 period is hopeful, as are signs of relative prosperity among those who established independent next-generation households. In addition, access to services has improved.     

Insights from Accounting Practitioners on China's Convergence with IFRS

This study provides insights from accounting practitioners on China's convergence with International Financial Reporting Standards (IFRS). Through a survey of 33 senior financial executives of Chinese listed companies in 2014, the study reports their perceptions on the following issues: first, the degree of convergence between IFRS and Chinese Accounting Standards (CAS); second, the choice between fair value and historical cost accounting, and the usefulness of fair value accounting for Chinese companies’ financial reporting; third, challenges in the process of China's harmonisation with IFRS; and finally, essential capabilities of Chinese accounting professionals in the process of China's harmonisation with IFRS. Multivariate regression was used for further analysis. The survey findings reveal that in general CAS have converged with IFRS, with a few exceptions that reflect the unique Chinese context. Historical cost accounting is the preferred measurement base to fair value accounting. Exercising professional judgement was identified as a challenge for China's full convergence with IFRS. Ownership structure and the expertise of accounting practitioners were found to affect respondents’ judgements on China's convergence with IFRS. This study has policy implications for international accounting standard setters and accounting educators to consider the contextual issues of implementing IFRS in an emerging economy.     

A Knowledge-engineering approach to accounting education

In the context of the massive expansion of the knowledge base facing all fields of professional activity, instructional science (which embraces the use of a knowledge-engineering approach to curriculum design) could well help to unvael the complexity of important pedagogical issues confronting accounting educationalists. The delineation and use of an expert knowledge base within the framework of the ‘dimensions of processing model’ of human information processing provides a valuable focus for making decision about the breadth, depth and nature of specific educatinal objectives. Knowledge engineering, which is fundamental to this process, appears to provide an appropriate framework for the systematic planning, development, delivery and evaluation of high-quality education and training programmes. Such an approach base while ensuring practitioners and teachers to keep pace with their rapidly changing knowledge base while ensuring that students acquire and become competent in the use of the cognitive skills they need in order to work effectively in their chosen profession.     

Marketing and the law

Marketing decisions are particularly vulnerable to legal rulings made in both the courts and the legislatures. The effective management of those legal implications challenges the modern marketing professional. Grasping marketing’s overall legal environment, including its governing case law, regulatory statutes and future trends, is essential. This review will provide analysis of recent court cases and legislation with particular emphasis on creatively assisting the marketer’s management of the legal factor.     

A comparison of parametric and non-parametric efficiency measures: The case of Norwegian ferries

The trunk road system in Norway has to be supplemented by a number of ferries due to the long coastline with numerous islands and fjords. Most of the ferries are run by private companies, but at a loss. The deficit are covered by the Ministry of Transport. The subsidies have risen rapidly in the last years and have focussed attention on whether the ferries are really run as efficiently as possible. To change the incentives to economize, a lump-sum payment is considered. To implement such a system, an initial assessment of reasonable input requirements is needed. The aim of this article is to provide such a yardstick by establishing a best practice frontier. Both a non-parametric and a parametric approach to a deterministic frontier are tried and differences of results discussed. Peculiarities due to choice of methods are revealed. The efficiency distributions are quite similar for the two methods except for scale efficiency, where the parametric method indicates substantial unrealized scale economies, while the non-parametric approach shows the largest and some small ferries to be scale efficient. The results indicate a substantial rationalization potential of about 30 percent in total.I am indebted to three referees for forcing me to improve significantly the quality of the study. Any remaining shortcomings are, of course, my responsibility.