Implications of FIN 46 for Accruals Quality and Investment Efficiency

The Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities – An Interpretation of ARB No. 51, in January 2003 and revised it in December 2003, with the objective to improve the transparency of financial information. Under FIN 46, companies are required to consolidate variable interest entities (VIEs) on financial statements if they are the primary beneficiaries of the VIEs. This dissertation empirically examines whether the implementation of this new financial reporting guidance affects firms’ accruals quality and investment efficiency. A manually collected sample comprised of firms affected by FIN 46 and firms disclosing no material impact from FIN 46 is used in the empirical analyses.The first part of the dissertation investigates the effects of FIN 46 on accruals quality. By using different accrual quality measures in prior studies, this study found that firms affected by FIN 46 experienced a decrease in accrual quality compared to firms reporting no material impact from FIN 46. Among the firms affected by FIN 46, firms consolidating VIEs were compared with firms terminating or restructuring VIEs. The accruals quality of firms consolidating VIEs was found to be lower than that of firms terminating or restructuring VIEs. These results are consistent in tests using alternative control samples.The second part of this dissertation examines the effects of FIN 46 on investment efficiency. Mixed results were found from using two different proxies used in prior literature. Using the investment-cash flow sensitivity to proxy for investment efficiency, firms affected by FIN 46 experienced a decrease in investment efficiency compared to firms reporting no material impact. It was also found that higher investment-cash flow sensitivity for firms consolidating VIEs during post-FIN 46 periods compared to both the no-impact firms and the matched pair control sample. Contrasting results were found when the deviation from expected investment is used as another proxy for investment efficiency. Empirical analyses show that FIN 46 firms experienced improved investment efficiency measured by the deviation from expected investment after their adoption of FIN 46. This study also provides explanations for the opposite results from the two different proxies.

Manipulação de resultados

Dissertação de Mestrado apresentado ao Instituto Superior de Contabilidade e Administração do Porto para a obtenção do grau de Mestre em Auditoria, sob orientação de Doutora Alcina de Sena Portugal Dias Esta versão contém as críticas e sugestões de elementos do júri

Efeitos da adoção obrigatória das IFRS sobre a qualidade do ambiente informacional: a relevância dos fatores institucionais

O estudo investiga os efeitos da adoção obrigatória das IFRS sobre a qualidade do ambiente informacional e confirma a hipótese de que os incentivos econômicos associados aos fatores institucionais são mais relevantes do que os padrões contábeis para explicar a qualidade do ambiente informacional. Foi utilizada uma amostra de 15 países que não passaram por reformas significativas na estrutura de enforcement legal, proporcionando uma estratégia de identificação econométrica mais robusta. Os países analisados adotaram as IFRS em momentos diferentes a partir de 2006. Foram utilizadas quatro métricas de qualidade dos accruals e três métricas de performance dos analistas para operacionalizar a variável dependente qualidade do ambiente informacional. Além disso, foram utilizadas como variáveis mediadoras diversas características institucionais com potencial de afetar os incentivos à elaboração e divulgação de demonstrações financeiras. Os resultados indicam que a adoção obrigatória das IFRS afetou de forma negativa a qualidade dos accruals e a performance dos analistas. No entanto, esses resultados são contingentes à qualidade da infraestrutura institucional da jurisdição que adotou as IFRS como modelo contábil obrigatório. Os efeitos das IFRS foram significativamente mais positivos (ou menos negativos) para os países com origem legal common law, estrutura de enforcement legal mais forte, mercado de capitais mais desenvolvido, menor diferença entre padrões contábeis locais e padrões internacionais, maior grau de liberdade econômica, menor corrupção percebida e instituições mais sólidas. Foram realizados testes de robustez para verificar a sensibilidade desses resultados. Os resultados permaneceram qualitativamente iguais após serem aplicados diferentes critérios de amostragem, controlados os efeitos da crise financeira de 2008 e levado em conta o possível efeito aprendizado dos responsáveis pela elaboração e análise das demonstrações financeiras no primeiro ano de adoção. O estudo contribui com a literatura da área de contabilidade financeira e com os órgãos reguladores da indústria contábil ao fornecer evidências de que a adoção obrigatória das IFRS, quando não acompanhada por reformas econômicas e institucionais, não causará os benefícios informacionais esperados

Assessing earnings management in european publicly traded firms

We investigate if investors may benefit from using the accruals quality measure to assess the level of earnings management exercised by firms when preparing their accounting statements. More earnings management is expected to be associated with high information asymmetry among stock market participants because it makes earnings information less precise, thus providing an information advantage to informed investors relative to liquidity traders. Our results based on a sample of European publicly traded firms are consistent with a positive association between earnings management and information asymmetry. However, given some previous studies suggesting that accruals based measures may be noisy indicators of earnings management we further develop and test a method to enhance the performance of accruals quality in detecting earnings management.

Assessing Earnings Management in European Publicly Traded Firms

We investigate if investors may benefit from using the accruals quality measure to assess the level of earnings management exercised by firms when preparing their accounting statements. More earnings management is expected to be associated with high information asymmetry among stock market participants because it makes earnings information less precise, thus providing an information advantage to informed investors relative to liquidity traders. Our results based on a sample of European publicly traded firms are consistent with a positive association between earnings management and information asymmetry. However, given some previous studies suggesting that accruals based measures may be noisy indicators of earnings management we further develop and test a method to enhance the performance of accruals quality in detecting earnings management

Do economic and financial firm's situation affect the quality if financial reports?

We investigate whether firms’ economic and financial situation influence the Quality of their Financial Reports (FRQ). FRQ is fundamental for investors and it affects the international capital movements [Bradshaw et al. (2004)] and Gelos and Wei (2005)]. Following Schipper and Vicent (2003) we use two issues to access earnings quality: abnormal accruals and earnings persistence. For seventeen European countries, we find evidence that the economic performance affects FRQ. Big firms and those with high current earnings exhibit better financial information. These results are robust since they don’t depend on FRQ proxy and we have the same evidence when we estimate regression with economical and financial factors separately or together. About financial situation, it seems not to affect FRQ. However, in high leveraged firms, the capital structure becomes determinant.

Accounting accruals and information asymmetry in Europe

We investigate whether the positive relation between accounting accruals and information asymmetry documented for U.S. stock markets also holds for European markets, considered as a whole and at the country level. This research is relevant because this relation is likely to be affected by differences in accounting standards used by companies for financial reporting, in the traditional use of the banking system or capital markets for firm financing, in legal systems and cultural environment. We find that in European stock markets discretionary accruals are positively related with the Corwin and Schultz high-low spread estimator used as a proxy for information asymmetry. Our results suggest that the earnings management component of accruals outweighs the informational component, but the significance of the relation varies across countries. Further, such association tends to be stronger for firms with the highest levels of positive discretionary accruals. Consistent with the evidence provided by the authors, our results also suggest that the high-low spread estimator is more efficient than the closing bid-ask spread when analysing the impact of information quality on information asymmetry.

The Effect on Financial Reporting Quality of an Exemption From the SEC Reporting Requirements for Foreign Private Issuers

We test for differences in financial reporting quality between companies that are required to file periodically with the SEC and those that are exempted from filing reports with the SEC under Rule 12g3-2(b). We examine three earnings quality measures: conservatism, abnormal accruals, and the predictability of earnings. Our results, for all three measures, show different financial reporting quality for companies that file with the SEC than for companies exempt from filing requirements. This paper provides empirical evidence of a link between filing with the SEC and financial reporting quality for foreign firms.

Evidências internacionais dos efeitos da atuação de investidores institucionais na anomalia dos accruals

Os investidores institucionais, tais como os fundos de pensão, são entidades que administram recursos de numerosos grupos de pessoas, e que, por isso, tendem a gerir grandes carteiras de investimento e a ter incentivos para se tornar bem informados. Por isso, espera-se que eles sejam bons representantes da classe de investidores sofisticados, ou bem informados, e que o aumento de sua presença no mercado de capitais melhore a velocidade do ajuste do preço, contribuindo para evitar ineficiências do mercado, como, por exemplo, a anomalia dos accruals (Sloan, 1996), que é um atraso na revisão dos preços diante da informação sobre a magnitude dos accruals do lucro. Assim, o objetivo deste estudo é analisar, em diversos países, o impacto da participação de investidores institucionais sobre a anomalia dos accruals. São formuladas quatro hipóteses: (i) a proporção de informações sobre o desempenho futuro da empresa refletida no preço de sua ação é positivamente relacionada com o percentual de participação societária dos investidores institucionais; (ii) quanto maior for o percentual da participação societária de investidores institucionais, maior será a qualidade do lucro; (iii) quanto maior for a value relevance do lucro, maior será a anomalia dos accruals; e (iv) quanto maior for a participação societária dos investidores institucionais, menor será a anomalia dos accruals. Para se atingir os objetivos, a bibliografia sobre investidores institucionais, investidores sofisticados e anomalia dos accruals é analisada e cotejada com a literatura sobre value relevance e qualidade do lucro, em especial com o de Dechow e Dichev (2002). A pesquisa empírica utiliza dados de empresas não financeiras listadas nas bolsas de valores da Alemanha, do Brasil, da Espanha, dos Estados Unidos, da França, da Holanda, da Itália, do Reino Unido e da Suíça, e cobre o período de 2004 a 2013. A amostra contempla entre 2.314 e 4.076 empresas, totalizando entre 15.902 e 20.174 observações, a depender do modelo estimado. São realizadas regressões com dados em painel, uma abordagem de equações aparentemente não relacionadas (Seemingly Unrelated Regression - SUR) e a aplicação do teste de Mishkin (1983). Constata-se que nos Estados Unidos e na Itália os investidores institucionais são mais bem informados que os demais, e que na Alemanha, nos Estados Unidos, na França e no Reino Unido eles exercem um papel de monitoramento, pressionando por lucros de qualidade superior. Não se constata, porém, relação positiva entre value relevance do lucro e anomalia dos accruals, nem entre participação de investidores institucionais e esta anomalia. O estudo enriquece a discussão sobre o mercado ser eficiente a longo prazo, mas apresentar anomalias no curto prazo; enfatiza a importância de o investidor ser capaz de converter informações em previsão e avaliação; discute o vínculo entre o papel de monitoramento dos investidores institucionais e a qualidade do lucro; e avalia a relação entre a atuação destes investidores e o prices lead earnings.

[association Between Physical And Psychosocial Impacts Of Oral Disorders And Quality Of Life Among The Elderly].

This study sought to evaluate the association between the impact of oral disorders in terms of physical/psychosocial dimensions and quality of life among the elderly. It involved a cross-sectional study conducted among the elderly (65-74 years) in 2008/2009. The social impact was assessed using the Oral Health Impact Profile (OHIP 14) and the quality of life using the SF 12 Short-Form Health Survey. Descriptive, univariate and multivariate (logistic regression) analysis was conducted with correction for the design effect, using SPSS(r)18.0 software. Of the 800 individuals approached, 736 elderly individuals participated (TR = 92%), with a mean age of 67.77 years, the majority of whom showed no impact based on the measurement of the prevalence of OHIP. The functional limitation dimension of the OHIP was associated with the physical domain of the SF12, irrespective of the other variables investigated. However, the seriousness of OHIP and its psychological discomfort and disability dimensions was associated with the mental domain of the SF12. The conclusion reached is that some impacts of oral disorders were associated with unsatisfactory quality of life in the physical and mental domains.

Applying The Maternal Near Miss Approach For The Evaluation Of Quality Of Obstetric Care: A Worked Example From A Multicenter Surveillance Study.

To assess quality of care of women with severe maternal morbidity and to identify associated factors. This is a national multicenter cross-sectional study performing surveillance for severe maternal morbidity, using the World Health Organization criteria. The expected number of maternal deaths was calculated with the maternal severity index (MSI) based on the severity of complication, and the standardized mortality ratio (SMR) for each center was estimated. Analyses on the adequacy of care were performed. 17 hospitals were classified as providing adequate and 10 as nonadequate care. Besides almost twofold increase in maternal mortality ratio, the main factors associated with nonadequate performance were geographic difficulty in accessing health services (P < 0.001), delays related to quality of medical care (P = 0.012), absence of blood derivatives (P = 0.013), difficulties of communication between health services (P = 0.004), and any delay during the whole process (P = 0.039). This is an example of how evaluation of the performance of health services is possible, using a benchmarking tool specific to Obstetrics. In this study the MSI was a useful tool for identifying differences in maternal mortality ratios and factors associated with nonadequate performance of care.

[diet Quality And Associated Factors Among The Elderly: A Population-based Study In Campinas, São Paulo State, Brazil].

The aim of this study was to assess the quality of diet among the elderly and associations with socio-demographic variables, health-related behaviors, and diseases. A population-based cross-sectional study was conducted in a representative sample of 1,509 elderly participants in a health survey in Campinas, São Paulo State, Brazil. Food quality was assessed using the Revised Diet Quality Index (DQI-R). Mean index scores were estimated and a multiple regression model was employed for the adjusted analyses. The highest diet quality scores were associated with age 80 years or older, Evangelical religion, diabetes mellitus, and physical activity, while the lowest scores were associated with home environments shared with three or more people, smoking, and consumption of soft drinks and alcoholic beverages. The findings emphasize a general need for diet quality improvements in the elderly, specifically in subgroups with unhealthy behaviors, who should be targeted with comprehensive strategies.

Mastication Movements And Sleep Quality Of Patients With Myofascial Pain: Occlusal Device Therapy Improvements.

Patients with myofascial pain experience impaired mastication, which might also interfere with their sleep quality. The purpose of this study was to evaluate the jaw motion and sleep quality of patients with myofascial pain and the impact of a stabilization device therapy on both parameters. Fifty women diagnosed with myofascial pain by the Research Diagnostic Criteria were enrolled. Pain levels (visual analog scale), jaw movements (kinesiography), and sleep quality (Epworth Sleepiness Scale; Pittsburgh Sleep Quality Index) were evaluated before (control) and after stabilization device use. Range of motion (maximum opening, right and left excursions, and protrusion) and masticatory movements during Optosil mastication (opening, closing, and total cycle time; opening and closing angles; and maximum velocity) also were evaluated. Repeated-measures analysis of variance in a generalized linear mixed models procedure was used for statistical analysis (α=.05). At baseline, participants with myofascial pain showed a reduced range of jaw motion and poorer sleep quality. Treatment with a stabilization device reduced pain (P<.001) and increased both mouth opening (P<.001) and anteroposterior movement (P=.01). Also, after treatment, the maximum opening (P<.001) and closing (P=.04) velocities during mastication increased, and improvements in sleep scores for the Pittsburgh Sleep Quality Index (P<.001) and Epworth Sleepiness Scale (P=.04) were found. Myofascial pain impairs jaw motion and quality of sleep; the reduction of pain after the use of a stabilization device improves the range of motion and sleep parameters.

[larynx Cancer: Quality Of Life And Voice After Treatment].

Treatments for patients with laryngeal cancer often have an impact on physical, social, and psychological functions. To evaluate quality of life and voice in patients treated for advanced laryngeal cancer through surgery or exclusive chemoradiation. Retrospective cohort study with 30 patients free from disease: ten total laryngectomy patients without production of esophageal speech (ES); ten total laryngectomy patients with tracheoesophageal speech (TES), and ten with laryngeal speech. Quality of life was measured by SF-36, Voice-Related Quality of Life (V-RQOL), and Voice Handicap Index (VHI) protocols, applied on the same day. The SF-36 showed that patients who received exclusive chemoradiotherapy had better quality of life than the TES and ES groups. The V-RQOL showed that the voice-related quality of life was lower in the ES group. In the VHI, the ES group showed higher scores for overall, emotional, functional, and organic VHI. Quality of life and voice in patients treated with chemoradiotherapy was better than in patients treated surgically. The type of medical treatment used in patients with laryngeal cancer can bring changes in quality of life and voice.

Pain Threshold And Sleep Quality In Women With Endometriosis.

Pain is a common complaint in women with endometriosis and can be influenced by many variables, including sleep disorders; however, no data are available on the sleep quality of women with endometriosis or on the correlation between sleep quality and pain. The 510 volunteers included in this study were divided into two groups: 257 women with a laparoscopic and histopathological diagnosis of endometriosis and 253 women with no history of endometriosis and no endometriosis-related symptoms. The volunteers answered two questionnaires: the Post-Sleep Inventory to evaluate sleep quality and the International Physical Activity Questionnaire to assess their level of physical activity. Pain was evaluated using a visual analogue scale (VAS) and women were also submitted to a physical examination, during which their pain threshold was assessed at 20 different body sites. Sleep quality was significantly poorer in women with endometriosis compared to women without the disease. The pain threshold was significantly lower in the greater trochanter and abdomen in women with endometriosis when compared to women without the disease; however, there was no difference in VAS pain score between the groups. The higher the VAS pain score, the lower the Post-Sleep Inventory score. Additionally, there was a significant positive correlation between the pain threshold at some body sites and sleep quality. Sleep quality was poorer and the pain threshold at certain body sites was lower in the group of women with endometriosis.