Mattias Hamberg

The adoption of IFRS 3: the effects of managerial discretion and stock market reactions

In recent years, several accounting standards, including IFRS 3, issued by the IASB, substitute historical cost with fair value measures and so provide managers with increased discretion to determine fair value without an actual market for the asset. Using Swedish data, we document the accounting consequences of the adoption of IFRS 3 and the stock markets reaction. After the adoption of this standard in January 2005 the amount of capitalized goodwill increased substantially. Goodwill impairments under IFRS are considerably lower than goodwill amortizations and impairments made under Swedish GAAP. Consequently, the adoption of IFRS 3 increased reported earnings. An analysis of economic incentives influencing the impairment decision at the initial adoption of IFRS 3 shows that tenured management is negatively associated with the impairment decision. However, most firms did not reclassify goodwill or make additional impairments. Firms with substantial amounts of goodwill yielded abnormally high returns despite abnormally low earnings. Investors seem to, correctly or incorrectly, have viewed the accrual-based increase in earnings stemming from IFRS 3 as an indication of higher future cash flows.

Accounting Conservatism and Transitory Earnings in Value and Growth Strategies

The value premium earned on value and growth investment strategies increases after adjusting for transitory earnings and for the accounting conservatism bias in the book value of equity. Simple investment strategies based on earnings-to-price (E/P) and book-to-market (B/M) performed on the Swedish stock market between 1980 and 2004 generate an annual value premium of 11 to 14%. Adjustments for transitory earnings and for the conservatism bias increase the value premium by 2 to 4 percentage points, and at the same time they improve the consistency of earning it. These results suggest that transitory earnings and accounting conservatism introduce noise into E/P and B/M measures. Adjusting for these accounting characteristics makes the identification based on E/P and B/M more effective. Copyright (c) 2010 Blackwell Publishing Ltd.

Founding-family firms and the creation of value: Swedish evidence

Purpose - The purpose of this paper is to investigate the extent to which founding-family firms create value. In particular, the paper investigates how agency costs and monitoring capabilities influence the value creation process. Design/methodology/approach - The empirical analysis relies on unique hand-collected ownership data that has been collected for all Swedish publicly listed firms in the years 2001 to 2010 (2,128 observations). The research design employs level regression specifications and they are tested using pooled cross-sectional regressions with controls for year and industry fixed effects. Findings - The paper confirms previous studies that firms with founding family ownership have a higher value (Tobins Q) and higher performance (RNOA). In contrast to prior studies, the paper finds that firm value and performance is significantly higher when ownership is concentrated the most. The paper also shows that firm value and performance is significantly lower for long-term non-founding-family ownership. Originality/value - This is one of the largest single-country analyses of founding family owner effects on value and performance in publicly listed firms. The paper confirms known associations between ownership and performance in a unique institutional setting. The paper extends previous research findings by identifying differences in value and performance between founding family owners and long-term non-founding-family owners.