Esther Ortiz Martínez

International financial analysis and the handicap of accounting diversity

Financial analysis at international level has to overcome a lot of obstacles that increase the uncertainty which the financial analyst is used to handling. It is commonly argued by accounting regulators, academics, and so on, that different accounting standards are one of these handicaps. For this reason European listed companies will be required in year 2005 to elaborate consolidated financial statements according to International Accounting Standards. Will it be a solution for the handicaps that face financial analysts? The objective of this study is to see how accounting diversity can be resolved and what are the conclusions of financial analysts in capital markets. The prior hypotheses will be: first, that accounting diversity is not what introduces the most important uncertainty in the international financial analysis, and second, that accounting diversity is avoided instead of being corrected. It is evidenced that the most important factors of diversity are strategies of the company and that analysts try to reduce the impact of accounting diversity, for example, using less biased ratios such as Enterprise Value/EBITDA.

No Principals, No Principles and Nothing in Reserve: Shell and the Failure of Agency Theory

Purpose – Agency Theory is normally used to explain the relationship between the managers of a corporation and its owners, or shareholders, and to legitimate the payment of share options, and other remuneration mechanisms, to those managers on the basis that this will align the interests of the managers of a corporation with those of its owners. The paper aims to argue that this outworn legitimation is not just based on a bankrupt theory but is actually deleterious to corporate performance, managerial behaviour and the relationship between managers, shareholders and other stakeholders.Design/methodology/approach – The approach is to examine the behaviour of the managers of The Royal Dutch/Shell Group of Companies (“Shell”) as they have continued to reinterpret accounting regulations, reclassify oil reserves and re‐report past and probable/possible future performance of the company.Findings – The argument is predicated in the assertion that in the relationship between owners and managers of such a corporat...

Analyzing Foreign Financial Statements: A Dual Scaling Approach to the International Ratio Analysis

Foreign companies listed on the New York Stock Exchange (NYSE) are required by its supervisor organism (Securities Exchange Commission, SEC), to restate their reported net income and shareholders’ equity calculated according to domestic accounting standards, into US General Accepted Accounting Principles (US-GAAPS), as a part of a Form 20-f filing. Using these restatements and dual scaling methodology we will be able to distinguish if there are really so important differences among accounting standards around the world, or on the contrary, some other effects, such as the country in which the company is located, also affect financial information in the most important way than the own accounting standards.