This paper examines the value relevance of accounting fundamentals in the Mexican Stock Market ([BMV] – Bolsa Mexicana de Valores). The research question that motivated the paper was: Can accounting fundamentals provide relevant information to better understand firm value? More specifically, the paper examines whether the application of an accounting fundamental strategy to select stocks of a p...

However, the free cash flows scale is important for the financial health of the company, but it has also its own limitations. Moreover, it’s not immune from accounting tricks. Free cash flows can be considered as a measure of value for shareholders of listed companies on Tehran Stock Exchange. The managers of these companies have tended to use the earnings management for managing the free cash ...

Unlike accounting earnings, economic profit (EVA) is a measure of a company's true earnings because it fully "accounts" for the costs of all forms of financing, including debt and equity. In the EVA view, a company is not truly profitable unless it earns a return on capital that bests the opportunity cost of capital. That being said, the question addressed here is how to measure the economic pr...

We show that network advantages constitute an important intangible asset that goes unrecognized in the financial statements. For a sample of e-commerce firms, we find that network advantages created by Web site traffic have substantial explanatory power for stock prices over and above traditional summary accounting measures such as earnings and book value of equity. Also, network advantages are...

We provide a simple comparative test of contracting and value relevance theories of accounting, using data on the importance of countries’ debt and equity markets. Contracting (debt markets) theory predicts conditional conservatism, in the Basu (1997) sense of asymmetrically timelier loss recognition than gain recognition, as proxied by a stronger relation between earnings and negative returns....

Survey and empirical evidence reveals that managers prefer to avoid earnings dilution, though financial theory suggests that it is irrelevant in firm valuation. We explore contracting and behavioral explanations for this apparent paradox. Using a large sample of debt/equity issuers, we report evidence that managers only avoid earnings dilution when their bonus compensation explicitly depends up...

This paper examines whether the “soft” information contained in the text of management’s quarterly earnings press releases is incrementally informative over the company’s reported “hard” earnings news. We use Diction, a textual-analysis program, to extract various dimensions of managerial net optimism from more than 20,000 corporate earnings announcements over the period 1998 to 2006 and docume...

We examine the unique nature of agency problems within publicly traded family firms by investigating the earnings management decision of dominant family owners relative to nonfamily. To do so, we draw upon literature demonstrating that family owners are loss averse with respect to the family’s socioemotional wealth (SEW), or the affective endowment derived from firm ownership and control. Our t...

In this paper, we present the results from a field experiment in the Netherlands in which single mothers on welfare were stimulated to find a job. Two policy instruments were introduced: an earnings disregard and job creation. The experiment was performed at the level of municipalities. In our analysis we make a distinction between native and immigrant welfare recipients. For immigrant single m...

A large body of accounting research in the past has documented the existence of conservatism and timeliness of income recognition as distinct factors which affect the returns-earnings relation. However, earnings are not the only measure of financial performance that is affected by conservatism. The aim of this paper is to examine the impact of conservatism on accrual measures and drivers, in th...