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on Accounting and Auditing |
| By: | Gao, Pingyang |
| Abstract: | This paper examines the market efficiency consequences of accounting disclosure in the context of stock markets as a Keynesian beauty contest, an influential metaphor originally proposed by Keynes (1936) and recently formalized by Allen, Morris, and Shin (2006). In such markets, public information plays an additional commonality role, biasing stock prices away from the consensus fundamental value toward public information. Despite this bias, I demonstrate that provisions of public information always drive stock prices closer to the fundamental value. Hence, as a main source of public information, accounting disclosure enhances market efficiency, and transparency should not be compromised on grounds of the Keynesian-beauty-contest effect. |
| Keywords: | Keynesian Beauty Contest; Public Information; Coordination; Market Efficiency |
| JEL: | K2 M4 E3 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:9480&r=acc |
| By: | GAVIN C REID; JULIA A SMITH |
| Abstract: | The paper uses a range of primary-source empirical evidence to address the question: ‘why is it to hard to value intangible assets?’ The setting is venture capital investment in high technology companies. While the investors are risk specialists and financial experts, the entrepreneurs are more knowledgeable about product innovation. Thus the context lends itself to analysis within a principal-agent framework, in which information asymmetry may give rise to adverse selection, pre-contract, and moral hazard, post-contract. We examine how the investor might attenuate such problems and attach a value to such high-tech investments in what are often merely intangible assets, through expert due diligence, monitoring and control. Qualitative evidence is used to qualify the more clear cut picture provided by a principal-agent approach to a more mixed picture in which the ‘art and science’ of investment appraisal are utilised by both parties alike. |
| Keywords: | venture capital, high technology, accounting information, intangible assets, financial reporting. |
| JEL: | G11 G24 M41 O3 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0806&r=acc |
| By: | Gao, Pingyang |
| Abstract: | It is widely believed that disclosure quality improves investors’ welfare by reducing cost of capital in a competitive market. This paper examines this conventional wisdom by studying a production economy in which disclosure influences a firm’s investment decisions. I demonstrate three points. First, cost of capital could increase with disclosure quality when new investment is sufficiently elastic. Second, there are plausible conditions under which disclosure quality reduces the welfare of current and/or new investors. Finally, cost of capital is not a sufficient statistic for the effects of disclosure quality on the welfare of either current or new investors. These results may help interpret the mixed empirical findings on the relation between disclosure quality and cost of capital, inform the empirical efforts to measure the economic consequences of accounting disclosure, and add to the ongoing debate on the reform of financial reporting and disclosure regulation. |
| Keywords: | Cost of Capital; Disclosure;Welfare; Real Effect |
| JEL: | K2 G2 M4 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:9478&r=acc |
| By: | Marco Trombetta (Universidad Carlos III de Madrid); Francisco Bravo Urquiza (Universidad de Sevilla); María Cristina Abad Navarro (Universidad de Sevilla) |
| Abstract: | In recent years, users' information needs have changed, and forward-looking information has become of great importance, as it has been highlighted in many international and national reports. Nonetheless, Spanish regulations are not very specific in this respect, since although it is required to publish prospective information in certain cases, nothing is set about the extend of this disclosure. Regulation has been changing during the period of analysis, and we aim to determine the need for increasing the legal requirements due to the relevance of this kind of information. Our goal is to examine the level of publication of voluntary prospective information by IBEX-35 firms, and to determine the corporate characteristics that are associated with the disclosure of prospective information. From the results obtained, it is to be noted that the level of prospective information disclosed in the annual reports seems to be low. In addition, the companies that disclose more prospective information are those of a higher size, with lower proprietary costs, a higher leverage and lower growth rates. En los últimos años las necesidades informativas de los usuarios han evolucionado, adquiriendo gran importancia la información previsional, como se desprende de multitud de informes nacionales e internacionales. Sin embargo, la normativa española no es muy concreta al respecto, pues aunque exige la publicación de información previsional en determinados casos, no especifica el nivel de detalle. En un momento de cambios en la legislación, nos planteamos la conveniencia de aumentar las exigencias informativas debido a la relevancia de esta información. Nuestro objetivo es estudiar el nivel de publicación voluntaria de información previsional en las empresas del IBEX-35, y determinar las características empresariales que están asociadas con el suministro de dicha información. Entre los resultados obtenidos se puede destacar el bajo nivel de publicación de información previsional en las empresas estudiadas, y que las que suministran más información previsional son aquellas de mayor tamaño, con menores costes propietarios, mayor endeudamiento y menores tasas de crecimiento. |
| Keywords: | información financiera previsional, revelación de información, análisis contable. Forward-looking information, information disclosure, financial analysis. |
| JEL: | M41 G11 G14 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasec:2008-10&r=acc |
| By: | María del Carmen Boado Penas (Universitat de València); Carlos Vidal- Meliá (Universitat de València) |
| Abstract: | The aim of this work is twofold: on the one hand, to demonstrate the utility of the actuarial balance as an element of transparency, an indicator of the solvency, sustainability and financial solidity of the pay-as-you-go system and a tool capable of providing positive incentives to improve the financial management of the system, eliminating or at least reducing the traditional divergence between the planning horizon of the politicians and that of the system itself; and on the other, to make the first estimates of the actuarial balance of the Spanish contributory pension system for the old age contingency, based on official figures. To this end, we analytically explain the novel entry in the balance sheet called the ¿Contribution Asset¿, and compare it to the ¿Hidden Asset¿. We also provide a comparison between the official actuarial balance for the Swedish notional account system and the Spanish balance. The main finding is that the Spanish pension system shows a 31.4% insolvency ratio for 2006. Moreover, a comparison of the consecutive balance sheets for 2001-06 shows that the system has a structural actuarial disequilibrium, which means that the degree of insolvency is growing over time even though the cash-flow outcome has improved over the same period. The absence of a balance sheet in this specific case produces a ¿mirage effect¿ by hiding the presence of a capital deficit, relativising future cash deficits and, more importantly, not taking steps to reverse this trend, restore solvency and eliminate the ¿losses¿ or ¿increases¿ in the accumulated deficit which accrue every year that passes without reform. Two main suggestions for economic policy spring from this paper: the need to compile an official actuarial balance sheet and actuarial annual results so that society may be made aware of the real situation of the Spanish pension system, and the advisability of applying an automatic balancing mechanism which, would predetermine the combinations of gradual parametric adjustments needed to reverse the negative trend and set the Spanish pension system on the road to solvency in the long run. El objetivo de este trabajo es doble, por un lado mostrar la utilidad del balance actuarial como elemento de transparencia, indicador de la solvencia, sostenibilidad o solidez financiera del sistema de reparto e instrumento que es capaz de proporcionar incentivos positivos para la mejora de la gestión financiera al minimizar la tradicional divergencia entre el horizonte de planificación de los políticos y el del propio sistema en sí; por el otro, realizar la primera estimación, a partir de datos oficiales, del balance y de resultado actuarial del sistema español de pensiones contributivas de jubilación. Con el fin de alcanzar los objetivos propuestos, se desarrolla analíticamente el elemento más novedoso del balance actuarial, el denominado "Activo por cotizaciones", y éste se contrasta con el "Activo Oculto", también se realiza la estimación del balance actuarial del sistema público de pensiones español y se compara el ratio de solvencia que deriva del balance español con el del sistema sueco de pensiones. El indicador de solvencia del sistema español está lejos de ser considerado razonablemente solvente, ya que, para el año 2006, un 31,4% del pasivo actuarial no tiene cobertura. Es más, el estudio de la serie de balances para el período 2001-2006 revela que el sistema presenta un desequilibrio actuarial estructural lo que provoca un aumento continuo del grado de insolvencia, pese a que el sistema ha obtenido un superávit de tesorería en el período objeto de estudio. La ausencia de balance actuarial, en este caso concreto, produce un "efecto espejismo" al ocultar la presencia de un déficit patrimonial, relativizar los déficits de caja futuros y sobre todo, diferir la toma de medidas efectivas para restaurar la solvencia del sistema y eliminar las "pérdidas" o incrementos en el déficit acumulado, que se están devengando por cada año que transcurre sin reforma. Las principales recomendaciones de política económica que se desprenden de este trabajo son dos: la necesidad de elaborar oficialmente el balance y el resultado actuarial anual con el fin de concienciar a la sociedad sobre la verdadera situación del sistema de pensiones, y la conveniencia de introducir un mecanismo de ajuste automático que, al menos predetermine la combinación de ajustes paramétricos graduales que empujen sostenidamente al sistema a la senda de la solvencia financiera en el largo plazo. |
| Keywords: | España, Jubilación, Pensiones, Sistema de reparto, Solvencia, Suecia. Spain, Retirement, Pensions, Pay-as-you-go, Solvency, Sweden. |
| JEL: | H55 J26 M49 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasec:2008-02&r=acc |