Irene Tutticci

Respondent Lobbying in the Australian Accounting Standard‐setting Process: ED49 – A Case Study

Aims to contribute to the understanding of the Australian standard‐setting due process. Analyses submissions made on Exposure Draft 49 Accounting for Identifiable Intangible Assets (ED49) as a case study of the strategies employed by lobbyists in their attempt to influence the accounting standard setters. Previous studies on respondents′ submissions have ignored the possibility that, in responding to exposure drafts, lobbyists are provided with a means of persuasion in excess of casting votes. Employs a form of content analysis to study the political process of standard setting. The results suggest that respondents on ED49 attempted to weight their lobby positions with the use of supporting arguments that utilized conceptual and/or economic consequences rationale and presented positions of differing strengths.

A review of accounting research in the Asia Pacific region

In this paper, we review scholarly accounting research published within the Asia Pacific Region by analysing nine of the main accounting journals within the region along five dimensions. The nine journals we focus on are: Accounting, Auditing and Accountability Journal; Australian Accounting Review; Abacus; Accounting and Finance; Australian Journal of Management; Accounting Research Journal; Journal of Contemporary Accounting and Economics; Managerial Auditing Journal; and Pacific Accounting Review. The five dimensions we consider are: the most frequently cited papers; topical coverage; impact on practice; research method; and noted authors. Our review leads us to conclude that the accounting journals published within the Asia Pacific region make a significant contribution to research and practice both within the region and internationally.

Market Reaction to Takeover Rumour in Internet Discussion Sites

We examine the market reaction to takeover rumour postings in the Hotcopper Internet Discussion Site (IDS). Results from the interday analysis show abnormal returns and trading volumes on the day before and the day of the posting. Results of the intraday analysis show abnormal returns and trading volumes during the 10 min posting interval and abnormal trading volume during the 10 min interval immediately preceding it. Sensitivity analyses indicate that the results are robust to concerns regarding potential confounds, credibility and bid–ask spread bias. Taken together, these findings are consistent with the market reacting to the posting of takeover rumours in IDS.

Market's Perception of Deferred Tax Accruals

This study investigates the value relevance and incremental information content of deferred tax accruals reported under the ‘income statement method’ (AASB 1020 Accounting for Income Taxes) over the period 2001–2004. Our findings suggest that deferred tax accruals are viewed as assets and liabilities. We document a positive relation between recognized deferred tax assets and firm value using the levels model, while the results from the returns model suggest that deferred tax liabilities reflect future tax payments. The balance of unrecognized deferred tax assets provides a negative signal to the market about future profitability, particularly for companies from the materials and energy sectors and loss-makers.

Inter‐Temporal Changes in Analysts’ Forecast Properties Under the Australian Continuous Disclosure Regime

Corporate disclosure regulations are important mechanisms for investor protection. This study examines the inter-temporal changes in analysts’ forecast properties over the period 1988–2001 as Australia’s continuous disclosure regulation and enforcement intensity changed. The effectiveness of the continuous disclosure regime has been a question of interest since its inception, but research in this area is limited. Our results suggest that analysts’ forecast accuracy and dispersion improved for sample firms in response to the proposal and introduction of continuous disclosure regulations. However, following increased enforcement from 1998, analysts’ forecast dispersion deteriorated for small firms, possibly due to a decrease in private information received by financial analysts as regulators became more proactive in enforcing the ban on selective disclosure.

Does the market price the nature and extent of earnings management for firms that beat their earnings benchmark

This study investigates whether the abnormal returns at the quarterly earnings announcement date varies according to the market’s expectations of the nature (informative vs opportunistic) and extent of discretionary accruals for firms that meet or beat expectations (MBE). In doing so, this study introduces an innovative model that measures the market’s expectation of the informativeness of earnings at the earnings announcement date and assesses the impact on the abnormal return for the interaction between the nature and expected extent of earnings management. A large sample of Standard & Poor’s (S&P) 500 firms that meet or exceed their earnings expectation over the period of 1998 to 2007 is analyzed. The results reveal that the expected extent of earnings management has a positive (negative) relation with the abnormal return when earnings management is informative (opportunistic).

The Relevance of Family Characteristics to Individual Fund Flows

This paper examines the relevance of fund specific and family variables in the determination of money flows to Australian investment funds. The existing literature establishes the relevance of past period returns to individual fund flows. Our results show that family characteristics are also relevant to flows. Investors in individual funds are sensitive to family size, family age and product proliferation. We also find some evidence that the top performing funds within a family receive greater flows. The reported relations show that investors recognise that a fund is an embedded member of the family, where fund-level and family-strategies are important to the investment decision.

The Value Relevance of Equity Accounting in Australia during the Pre-Recognition Regulatory Period

Abstract For a period of 26 years, Australian reporting requirements for equity accounting were out of step with international accounting practice, requiring equity accounting to be reported in a note to the accounts and the cost method to be employed in the statutory financial statements. This paper utilises the uniqueness of the Australian regulatory setting to investigate whether equity accounting has greater value relevance than the cost method and whether it provides information incremental to the cost method during the “note disclosure period”. The results of both the valuation and returns models provide evidence that equity accounting has value relevance that is incremental to the cost method. Direct comparison of the two methods of accounting provides less conclusive evidence. Equity accounting is found to have statistically greater value relevance than the cost method for the valuation models, but not for the returns models. Differential reporting practices during the period of this study allow an extension of the study to consider two related issues. The first issue looks at the use of supplementary financial statements to report equity accounting as a signal by management of the relevance and/or reliability of equity accounted values. The results indicate that supplementary financial statements do not convey additional relevance or reliability to the market for equity accounted figures. The second extension of the study considers the effect of market value disclosure on the value relevance of equity accounting for companies with investments in publicly traded associates. The results indicate that although market value has incremental value relevance to the cost method equity, accounting has incremental value relevance to market value.

Target price forecasts: Fundamental and non-fundamental factors

This paper reveals both fundamental and non-fundamental factors play an important role in analysts’ target price formation. Analysts’ forecasts of short-term earnings and long-term growth are shown to be important explanatory variables for target prices; equally, the following salient non-fundamental factors are also shown to explain target price levels and especially target price biases: the 52-week high price and recent market sentiment. Here, increases in the 52-week high and market sentiment measures of one standard deviation correspond to increases in positive target price bias of 4.8% and 14.7%, respectively. Initially our analysis is constrained to analysts who provide long-term growth forecasts, however, our findings are robust to the removal of this constraint and the broader set of analysts. Our analysis reveals that analysts place greater weight on these non-fundamental factors in settings with greater task complexity and/or resource constraints, and when they rely on valuation heuristics as opposed to more rigorous valuation methodology, and that this greater weight is associated with increased optimistic bias. Finally, our results show that analysts’ target prices are useful in predicting future stock returns beyond earnings forecasts and commonly used risk proxies. However, in an internally consistent fashion, the informativeness of target prices for future returns is significantly reduced when greater weight is placed on either the 52-week high or recent market sentiment in the target price formation process.

Corrigendum to: A review of accounting research in the Asia Pacific region:

We provide an addendum to Table 2, published in Benson et al. (2015) in which we correct an important omission in the listing of the most cited papers. In our table of the top 10 authors, we inadvertently omitted a paper by Davidson, Goodwin-Stewart and Kent (2005). Indeed, this paper is the top cited paper in Accounting and Finance. We offer our profound apologies to these authors and now provide a correction of Accounting and Finance citations in Table 2. (Table presented.)