Pre-adoption market reaction to IFRS 9:a cross-country event-study

We are the first to examine the market reaction to 13 announcement dates related to IFRS 9 for over 5400 European listed firms. We find an overall positive reaction to the introduction of IFRS 9. The regulation is particularly beneficial to shareholders of firms in countries with weaker rule of law and a smaller divergence between local GAAP and IAS 39. Bootstrap simulations rule out the possibility that sampling error or data mining are driving our findings. Our main findings are also robust to confounding events and the extent of the media coverage for each event. These results suggest that investors perceive the new regulation as shareholder-wealth enhancing and support the view that stronger comparability across accounting standards of European firms is beneficial to international investors and outweighs the costs of poorer firm-specific information.

Statnote 39: The binomial distribution: comparing two proportions

Many populations consist of two classes only, e.g., alive or dead, present or absent, clean or dirty, infected or non-infected, and it is the proportion or percentage of observations that fall into one of these classes that is of interest to an investigator. An observation that falls into one of the two classes is considered a ‘success’ (S), and ‘p’ is defined as the proportion of observations falling into that class. If a random sample of size ‘n’ is obtained from a population, the probability of obtaining 0, 1, 2, 3, etc., successes is then given by the binomial distribution. The binomial distribution can be used as the basis of a number of statistical tests but is most useful when comparing two proportions. This statnote describes two such scenarios in which the binomial distribution is used to compare: (1) two proportions when the samples are independent and (2) two proportions when the samples are paired.

Lys9 for Glu9 substitution in glucagon-like peptide-1(7-36)amide confers dipeptidylpeptidase IV resistance with cellular and metabolic actions similar to those of established antagonists glucagon-like peptide-1(9-36)amide and exendin (9-39)

The incretin hormone glucagon-like peptide-1(7-36)amide (GLP-1) has been deemed of considerable importance in the regulation of blood glucose. Its effects, mediated through the regulation of insulin, glucagon, and somatostatin, are glucose-dependent and contribute to the tight control of glucose levels. Much enthusiasm has been assigned to a possible role of GLP-1 in the treatment of type 2 diabetes. GLIP-l's action unfortunately is limited through enzymatic inactivation caused by dipeptidylpeptidase IV (DPP IV). It is now well established that modifying GLP-1 at the N-terminal amino acids, His7 and Ala8, can greatly improve resistance to this enzyme. Little research has assessed what effect Glu9-substitution has on GLP-1 activity and its degradation by DPP IV. Here, we report that the replacement of Glu9 of GLP-1 with Lys dramatically increased resistance to DPP IV. This analogue (Lys9)GLP-1, exhibited a preserved GLP-1 receptor affinity, but the usual stimulatory effects of GLP-1 were completely eliminated, a trait duplicated by the other established GLP-1-antagonists, exendin (9-39) and GLP-1 (9-36)amide. We investigated the in vivo antagonistic actions of (Lys9)GLP-1 in comparison with GLP-1(9-36)amide and exendin (9-39) and revealed that this novel analogue may serve as a functional antagonist of the GLP-1 receptor.

Discretion in accounting for pensions under IAS 19:using the ‘magic telescope’?

We use a panel data set of UK-listed companies over the period 2005–2009 to analyse the actuarial assumptions used to value pension plan liabilities under IAS 19. The valuation process requires companies to make assumptions about financial and demographic variables, notably discount rate, price inflation, salary inflation and mortality/life expectancy of plan members/beneficiaries. We use regression analysis to analyse the relationships between these key assumptions (except mortality, where disclosures are limited) and company-specific factors such as the pension plan funding position and duration of pension liabilities. We find evidence of selective ‘management’ of the three assumptions investigated, although the nature of this appears to differ from the findings of US authors. We conclude that IAS 19 does not prevent the use of managerial discretion, particularly by companies whose pension plan funding positions are weak, thereby reducing the representational faithfulness of the reported pension figures. We also highlight that the degree of discretion used reflects the extent to which IAS 19 defines how the assumptions are to be determined. We therefore suggest that companies should be encouraged to justify more explicitly their choice of assumptions.