Gaétan Breton

Accounting Information and Analyst Stock Recommendation Decisions: A Content Analysis Approach

Abstract We explore the information set used by sell-side equity analysts in their stock recommendation decisions through content analysis of their company reports. In particular, we assess the relative importance of accounting measures compared with non-financial information items. We conclude that whereas accounting information is of fundamental importance to analysts, it is not the only, nor even the most important, source. Financial analysts are equally concerned with the firms management and strategy and its trading environment in arriving at their investment recommendations. Our results have implications in terms of enhancing the relevance of financial reporting to key user constituencies.

Creative Accounting and Investment Analyst Response

Abstract This paper investigates the impact of window dressing on stockbroker analyst evaluation of a companys annual accounting numbers. A new methodological approach is used involving a laboratory experiment in which a large sample of experienced investment analysts drawn from five of the top London houses processes real company accounts. The research was conducted in the first half of 1990 at the end of a long bull market. The participating analysts were not overly concerned about the quality of published accounting information and creative accounting was not then viewed as a serious problem. Contrary to our prior expectations we found little evidence of window dressing adjustments being made by the subjects in general. However, those subjects who did correct were significantly more experienced. Possible explanations for our results and potential implications for capital market behaviour and information processing are discussed.

Profit and the legitimacy of the Canadian banking industry

Purpose – Legitimacy is defined as the ability to exercise authority without resorting to open coercion. It is an essential asset for firms seeking to reach and maintain profitability. In this context, the purpose of this paper is to present the case of the Canadian banking industry, which has been highly criticized during the last decade for its record profits, low level of risk taking, high fees and buoyant CEO compensation packages. More specifically, this research aims to analyze the general publics perceptions of the industry during a 50-month period, starting with the first strong reaction to recurrent announcements of record profits. It also seeks to look at industry reactions as a response to bank bashing. Design/methodology/approach – The case study in this paper was conducted in two steps. It first analyzed public perceptions by studying the content of a sample of newspaper articles on the Canadian banking industry from 1996-2000. It then examined the industrys reactions by reviewing the documents found on the web site of the Canadian Bankers Association. Findings – The study shows that the crisis faced by the banking industry was of limited but sustained intensity. The industry used a mixed strategy, justifying itself through its public discourse and mounting a program to inform and educate the Canadian public on the effects of economic factors in their lives. The banking industry limited its reactions to Sethis first-level strategy found in the literature. Originality/value – The paper highlights how the general public perceive profit levels in the Canadian banking industry and how legitimacy is clearly an issue in this context.

The impact of the corporatization process on the financial performance of Canadian state‐owned enterprises

State‐owned enterprises (SOEs) have been described as being inefficient and losing money. The theories pretend that private property rights will solve the problem. In practice, SOEs are reorganized to follow the model of the private firm, a period known as the public sector corporatization. One critical element of this reform is an important modification of the mission of the firm away from social and toward profitability goals. Most SOEs become profit‐seeking organizations. The objective of this study is to examine the impact of the corporatization process on the financial performance of SOEs. From the Financial Post 500, we selected the largest SOEs in Canada. For each firm, the critical year of the mandate revision has been set as the beginning of the corporatization period. We covered the years between 1976 and 1996. The performance is measured from a multi‐criteria approach including measures of profitability and productivity. The results suggest that the financial performance of SOEs improves significantly when firms are corporatized. Therefore, the main difference in the financial performance is caused by the difference in the objectives of the firm, not the property or some dubious political activities.

From folk‐tales to shareholder‐tales: semiotics analysis of the annual report

Purpose – The purpose of this paper is to explore the use of semiotics analysis to better understand the annual report. It starts with the idea that the annual report is telling stories to the reader. As a form of novel, it can be analysed with the same instrument.Design/methodology/approach – The goal here is methodological. It is to propose an organized body of techniques that will allow anybody to conduct analysis from it. Therefore, one example is used uniquely to illustrate the method. The advantages of semiotics over content analysis are numerous. Content analysis remains quite trivial (counting words), while semiotics analysis takes into account the structure of the story at many levels.Findings – Framed by the categories of Aristotles rhetoric, a method is developed that is replicable with a limited background in the source disciplines. The results suggest that the annual report is clearly telling stories and respond quite positively to this kind of approach.Originality/value – Although it is oft...

Business in society or an integrated vision of governance

Corporate governance is more than disciplining managers to produce more value for the shareholders. It must include how the organization influences other social institutions in order to impose its view or legitimize its procedures

Restoring Social Legitimacy: Discursive Strategies Used By a Pharmaceutical Industry Leader

Purpose – The aim of this paper is to understand discursive strategies used by organizations to restore their fading legitimacy. This longitudinal case study is built around two events representing a threat to the legitimacy of the pharmaceutical industry. This study describes some subtle techniques employed to restore legitimacy during those difficult periods.Design/methodology/approach – This research analyzes the presidents letter of the annual report using semiotic tools designed to catch the essence and goals of the narrative sections. This case study covers 20 of Pfizer most recent annual reports (1988‐2007).Findings – The paper suggests that some narrative sections are built to protect legitimacy on two fronts. Most of the time, the discourse maintains legitimacy in front of the salient stakeholder by presenting the firms main “object of desire” as the enhancement of shareholders value. In a period of crisis, the narratives are built to restore legitimacy in the eyes of the general public. To do...

Social Network and Firm Performance: An Empirical Analysis of Canadian Boards

Despite a still low level of theorization of firm’s management, we have some proposals pointing in the direction of an effect of the Board composition on the performance. The Resource based view of the firm would explain this relationship by the social capital (networks) of Board’s members. This study examines the influence of social relationships of board of directors’ members on the performance of the firm using a sample of the 100 largest listed Canadian companies. Social relationships are measured by three factors: economic affiliations, political affiliations and social affiliations. The performance of the firm is measured by the return on assets. The results of regression analysis suggest that only the political affiliations of board of directors’ members have a significant although negative impact on the performance of the firm. These results suggest that separating business and politics might be a good idea as politics appear to be harmful to business.

Elements for sociology of profit

Purpose – The purpose of this paper is to revisit the foundations of profit and then consider the central role of the profit in the society inspired by the accounting practice, through its influence in the social construction of the accountants competency, and of the use accounting profession itself.Design/methodology/approach – Inspired largely by the sociology of the professions, this paper also borrows from classical economic theory to understand the contradictory role and functioning of the conventional notion of profit in the society.Findings – The paper presents the accountant as the master and great academic of this convention, and the profit as constituting for him a key resource in establishing an undisputed consensus around his competency based on a social valorization. This sacralization originates from the emptying of the economic concept while referring constantly to it. Therefore, the meaning is noisy and then, can be manipulated.Originality/value – The profit is the main product sell by th...

Directors' networks and access to collective resources

Purpose – This paper aims to illustrate the resource dependency theory by making ties between the different resources needed by a firm and the members of the board through their allegiances to different organizations. Many researchers have explained the formation of the board through a controlling function. Alternative explanation is proposed by the resource dependency theory. Design/methodology/approach – To investigate the case of the largest company in Canada, the authors took their data in the Boardex database. Then drawing an affiliation matrix, they used the Pajek software to analyze these connections. They obtained a non-directional social network prone to illustrate the resource dependency theory. Findings – The authors found different categories of resources being placed at firm’s disposal: political, social and economic, under different forms. Because a case study approach was used, the findings will be used to complete the theory rather than confirm or contradict it. The case firm is well-conne...