Peter R. Joos

The Effects Of Accounting Diversity - Evidence From The European-Union

In this paper, we investigate the financial statement effects of differences in accounting measurement practice in France, Germany, and the United Kingdom (U.K.). We find evidence of significant differences in financial ratios and the stock market valuation of accounting data. The differences do not appear to be explained by the composition of the sample or by macroeconomic factors; they are predictable, given crosscountry differences in reporting philosophies, and they are present for the components of net income which one would expect based on differences in accounting practice. The differences across countries appear largely unaffected by legislation enacted in response to the European Union (EU) directives, which were intended to create an integrated set of reporting standards to serve as a basis for cross-listing and facilitate cross-border investment.1 This research provides descriptive evidence, from a capital markets perspective, on how cross-country differences in measurement practices affect the comparability of the resulting accounting data. Europe provides a relevant context to examine this issue for several reasons. First,

Discussion of The Economic Consequences of Increased Disclosure

The basis for the study by Leuz and Verrecchia (hereafter LV) is the link between information asymmetries, market liquidity, and the cost of capital. The theory states that information asymmetries among market participants reduce expected liquidity in the market for a firms shares through the introduction of adverse selection. The reduction in liquidity raises transaction costs and ultimately the cost of capital. Previous empirical research that has studied the correlation between disclosure levels and the information asymmetry component of the cost of capital has produced mixed results, perhaps because measuring both (changes in) disclosure levels and the information asymmetry component of the cost of capital of firms is very difficult. LV observe that an additional explanation for the mixed results might be that the power of the tests in the previous studies is weakened because they focus on the U.S. capital market, which is characterized both by high liquidity and by a high level of disclosure. As a consequence, commitments to additional disclosure in this context could lead to relatively small benefits that may not be measured accurately. LV present an innovative extension of the current empirical disclosure literature by focusing on the German capital market setting. German accounting standards and

Costly Dividend Signaling: The Case of Loss Firms with Negative Cash Flows

We examine the dividend-signaling hypothesis in a sample of firms for which dividend increases are particularly costly, namely loss firms with negative cash flows. When compared to loss firms with positive cash flows, we find the predictive power of dividend increases for future return on assets to be greater for loss firms with negative cash flows, consistent with the predictive power of the dividend signal being stronger when its cost is higher. Our results provide support for the dividend-signaling hypothesis and have broader implications since loss firms comprise a large and increasing share of publicly-traded firms.

Analyst Forecast Bundling

Changing economic conditions over the past two decades have created incentives for sell-side analysts to both provide their institutional clients tiered services and to streamline their written res...