Pascal Dumontier

Accounting and capital markets: a survey of the European evidence

The relationship between accounting information and capital markets has been the subject of numerous studies, especially in the US. The purpose of this article is to examine the corresponding evidence in Europe. This review classifies the European literature into three groups: studies of the market reaction to newly released accounting information; studies of the long-term association between stock returns and accounting numbers; studies devoted to the use of accounting data by investors and to the impact of market pressure on accounting choices. The paper reviews and summarizes the main results related to each of these topics. It also addresses some methodological issues and provides suggestions for future research.

Accounting earnings and firm valuation: the French case

Considering that the level of the association between stock returns and accounting earnings provides a measure of the extent to which earnings summarize the information which is useful for firm valuation, this paper analyses the contemporaneous association between stock returns and earnings changes or earnings level of individual French stocks and portfolios for periods of one, two and five years between 1981 and 1990. The empirical findings are as follows. (a) Stock returns are more linked to earnings changes than to earnings levels indicating that earnings provide more information about changes in firm value than about firm value. (b) Earnings prepared in accordance with the French accounting principles are not less value-relevant than those prepared in accordance with US or UK GAAP. (c) A cross-sectionally and time-aggregated data procedure provides a large increase in the explanatory power of earnings for returns which is consistent with a noise-in-earnings effect probably induced by accounting measurement and valuation principles and with a recognition lag effect due to the fact that value-relevant events are not integrated into earnings exactly when they occur. These two effects are shown to be the major causes of the low association between earnings and returns generally observed in studies based on short period data for individual stocks.

Incremental Voluntary Disclosure on Corporate Websites, Determinants and Consequences

This study analyses the determinants and consequences of internet financial reporting (IFR). Our evidence indicates that firms use the internet to report complementary information on firm background, management forecasts, intangible assets and on social and environmental issues. Our results indicate that the decision to provide additional voluntary financial disclosures through corporate websites is mostly influenced by share turnover, the future profitability of the firm and the level of competition in the industry. Last, we find that the extent of voluntary disclosure on corporate websites is related positively to forecast accuracy, and negatively to the dispersion of analysts forecasts, suggesting that such disclosures provide useful information to analysts.

The Financial Impact of the French Government's Nationalization/Privatization Strategy

In 1982, the newly elected French government initiated an unprecedented move by undertaking a massive nationalization plan. This plan involved firms which, at the time, played a crucial role in the French economy. The governments move was short-lived, however, as a program leading to the privatization of some of the firms that had been nationalized in 1982 was initiated in 1986. This paper investigates the value that was created (destroyed) during the nationalization period for each of the French firms nationalized in 1982 and re-privatized between 1986 and 1997. This paper also investigates the extent to which the French citizens registered a gain or a loss as a consequence of the governments nationalization/privatization strategy. Our results show that the French government did not destroy value through the nationalization process. They also show that the French government, and thereby the French citizens, did not register any gain from the nationalization process because of the magnitude of both the premiums paid to shareholders of nationalized firms and the underpricing of shares at the time of privatization.