Dimosthenis L. Hevas

The State of Accounting and the State of the State

The purpose of this paper is to present a study of the evolution of accounting regulation within one country in the context of that countrys historical development, the origins and motivations of the legal system and the state, and the subsequent outcomes in terms of accounting rules and regulations. The case in point is Greece. However, the paper neither describes specific regulatory practices in a systematic manner nor rules that exist for the preparation of the financial statements. It is concerned instead with the relationship between the state and corporate accountability.In the context of accounting regulation, Greece has recently attracted attention in the research literature. Papas (1993) and Ballas (1994) were among the first to describe to an international academic audience various institutional aspects of corporate accounting in Greece while Neal (1997) has attempted to describe the social and economic forces that have shaped its development. However, this study offers new insights into the institutional framework of accounting and in particular the relationship of the state to accounting regulation.

Fixed assets revaluations and their association with stock returns

This study examines the association between annual stock returns of firms listed on the Athens Stock Exchange and the tax benefits of mandated fixed assets revaluations that occurred in the years 1982, 1988 and 1992. A significant association is found for the revaluations that occurred in 1992 but not for those that took place in 1988 or 1982 As the tax benefits are probably measured with error, we use the amount of the revaluation to explain stock returns with similar findings. When we extend the period over which we accumulate stock returns from one to two years, the association between stock returns and the amount of the revaluation is significant both in 1992 and in 1982. For the years 1992 and 1982, we also observe a significant association between stock prices and the revaluation amounts.

The differential information content of loss components under a conservative accounting regime

Purpose - This study aims to test empirically the validity of the accounting valuation model that is based on earnings and book values for loss-reporting firms under a conservative accounting regime. Design/methodology/approach - The empirical tests are performed by employing returns models on data derived from non-financial firms listed on the Athens Stock Exchange for the period 1992-2000. Findings - The empirical results suggest that there is no unique concept of income, which is applicable, for valuation purposes, in all circumstances. Total income may be the appropriate income concept to use for the valuation of profit reporting firms but not for loss-reporting ones; for loss-reporting firms, ordinary income appears to be a more useful concept for valuation purposes. Extraordinary income was also found to be value relevant. Further, different versions of the accounting valuation model appear to be more relevant for different groups of firms (groups defined in terms of various firm characteristics, such as: size, growth opportunities and riskiness. Practical implications - The study examines the informational content of the various earnings and loss items in the income statement and provides conclusions that are useful for standard setters, accounting policy makers and market participants. Originality/value - It provides further evidence on the value relevance of losses, as opposed to that of earnings. It coincides with the development of a new project initiated by the International Accounting Standards Board, i.e. “Reporting Comprehensive Income”, concerning the content of the income statement. The analysis is carried in an accounting environment that adopts only historic cost accounting for the recording and measurement of assets and liabilities, revenues and expenses.

The Information Content of Investment Tax Credits

This study examines the association between stock prices and tax credits for new investment, which appear in the balance sheet as a tax-free reserve. A number of valuation models were developed for companies listed on the Athens Stock Exchange during the period 1990–4. The empirical findings reveal that retained earnings committed to new investment, i.e. investment tax credits for future investments, are valued differently from both the remaining equity and the remaining earnings. Moreover, the empirical evidence suggests that the investment tax credits in Greece are not always viewed in a positive fashion by the stock market.