The relevance of the value-relevance literature for financial accounting standard setting

“Penelitian kualitas pelaporan keuangan yang menggunakan karakteristik kualitatif atas dasar Financial Accounting Standard Board (FASB) atau sebelum revisi diantaranya dilakukan oleh (Barth et al., 2001; Meulen et al., 2006; Schipper & Vincent, 2003).”

“, Jensen & Meckling, 1976). Based on this finding, Jensen (1986) develops the agency costs of FCF hypothesis, which suggests that shareholders' limited ability tomonitor opportunistic managerial behavior creates a potential for managers to spend internally generated cash flows for their own benefit rather than for max…”

“However, Holthausen and Watts (2001) argue that, in the absence of descriptive theories to justify empirical associations, the value relevance literature has limited implications for standard setting.”

“Holthausen and Watts (2001) indicate that the relevance of accounting numbers differs between equity and debt investors.”

“The related studies indicate that summarized accounting measure is associated with firm value (Brown et al., 1999; Barth et al., 2001; Holthausen and Watts, 2001; Lee and Wang, 2003).”

“…between reported and disclosed items in financial reports and capital market outcomes such as prices and returns (e.g. Barth et al. 2001, Holthausen and Watts 2001) and effects of financial reporting standards and amounts on investing and operating decisions, sometimes described as…”

“It has been noted that authors from the European and South Asian countries have not contributed too much, so the authors from European and South Asian countries should add to the literature of AC in more depth (Healy and Wahlen 1999; Holthausen and Watts 2001; Hui et al. 2009; Jackson and Liu 2010).”

“Though, Holthausen and Watts (2001) said that the relationship between accounting numbers from the financial statement and stock price is little, most of prior studies have focused on how market participants evaluate audit quality, and how this evaluation is reflected to the stock price (Becker et…”

“Holthausen and Watts (2001) suggest that value relevance studies use two different theories of accounting and standard setting to draw inferences: (i) “direct valuation” theory and (ii) “inputs-to equityvaluation” theory.”

“…on the latter, prior studies examine differences in how firms report such disclosures (Fields et al. 2001), how mandatory disclosures impact capital markets (Kothari 2001; Holthausen and Watts 2001), and whether the costs of disclosure regulation are excessive (Bushee and Leuz 2005; Zhang 2007).”

“Our empirical result is similar to previous related studies (Holthausen & Watts, 2001; Shleifer & Vishny, 1992; Williamson, 1988), which provide evidence for how EPU negatively affects the value of innovation and intangible assets.”

“…of financial statements, as well as of specific elements of them, in relation to the market value of publicly-traded companies (e.g. Ball and Brown, 1968; Beaver, 1968; Francis and Schipper, 1999; Holthausen and Watts, 2001; Barth et al., 2001; Lopes, 2001; Barth and Clinch, 2009; Lima, 2010).”

“However, Holthausen & Watts (2001) argued that past value relevance works of literature studying the association between accounting numbers and stock prices had limited implications or inferences to standard setting, due to the underlying theories are not descriptive.”

“The recognition criteria for goodwill impairment require unverifiable estimates of future cash flow or market values, which are susceptible to manipulation (Holthausen & Watts, 2001).”

“However, creditors may demand a higher level of transparency and conservatism to alleviate default risk (e.g., Leftwich 1983; Watts and Zimmerman 1986; Watts 1993; Holthausen and Watts 2001), which would encourage firms to include UTB interest and penalties in interest expense.”

“One important aspect of this research is to scale all independent variables by the total number of shareholding (Barth et al., 2001; Venkatachalam, 1996) to reduce scale 1 effect.”

“Our approach is related to the literature on earnings quality and abnormal trading profitability.”

“Holthausen/Watts [19] comprehensively criticize that literature/empirical studies concerning relevance respectively information quality omitted to develop a descriptive theory concerning financial reporting and standard-setting and that the conclusions therefore aren’t valid.”

“…value-based-overview camp about the market perception of goodwill (for example, McCarthy & Schneider, 1995) and the related asset status of goodwill (for example, Johnson & Petrone, 1998), most notably, in the value relevance literature (see Holthausen & Watts, 2001 for a useful summary article).”

“(2001) and Holthausen and Watts (2001) for in-depth discussions.”

“Research on value-relevance of accounting information has received a lot of attention in the accounting literature (e.g., Barth et al., 2001; Holthausen and Watts, 2001).”

“Value relevance of earnings, or earnings informativeness, becomes a powerful measure especially in investigating the information role of financial reporting (Holthausen & Watts, 2001).”

“However, if additional accounting factors that the literature regards as value relevant are considered, the results of this research may change (Barth et al., 2001; Holthausen & Watts, 2001).”

“However, changes in accounting rules from disclosure to recognition can decrease the value and risk relevance since the amounts are less verifiable (Holthausen and Watts, 2001).”

“Ramanna (2008) noted that the goodwill impairment test is a compromise choice for prospective developers in the face of political pressure.”

“In a historical context, their implementation is not always viable, since a strong assumption of these models is that capital markets (and therefore, prices and returns) are efficient and reflect all available information (Holthausen and Watts 2001).”

“…measure of future cash flow accord with the main objective of financial reporting as stated out by accounting standards setters which aimed in assisting users especially stock investors in predicting inflow and outflow of cash and also estimating the value of the company (Holthausen & Watts, 2001).”

“…current accounting conservatism measures as earnings–stock return relation measures (Ball, Kothari, & Robin, 2000; Basu, 1997; Givoly & Hayn, 2000; Holthausen & Watts, 2001; Pope & Walker, 1999), net asset measures (Ahmed, Morton, & Schaefer, 2000; Beaver & Ryan, 2000; Dechow, Hutton, & Sloan,…”

“Moreover, we approve that market valuation is not the single objective of standard setters (Holthausen and Watts (2001)) and overvaluation might be desired as part of a regulatory”

“The present research investigates the possible effects of the occurrence of a specific event on a company's performance and uses the value relevance paradigm put forward by Holthausen and Watts (2001)”

“holders in liquidation (Holthausen and Watts 2001; Kothari et al. 2010), analysts explained that goodwill represents “true value” to a firm because it is expected to generate future cash flows.”

“A general perspective is that accounting information is relevant if it impacts stakeholder decisions (Barth et al., 2001; Holthausen & Watts, 2001; Macedo et al., 2011; Malacrida, 2009), which is also a view of the IASB (IFRS Foundation, 2018).”

“In line with this, Holthausen and Watts (2001I) view value relevance as an empirical relation between market value and accounting variables.”

“Different value relevance researches have provided basis for standard setting (Barth et al. 2001; Holthausen & Watts, 2001), but recent studies published in top accounting journals have miserably failed in some common types of tests with less emphasis on theories, making such studies less relevant…”

“, Beaver, W. H. & Landsman, W. R. (2001). The Relevance of the Value Relevance For Financial Accounting Standard Setting: Another View. Working Paper, Stanford University, January: 1 – 41. Retrieved from: fbeaver@leland.stanford.edu. Beaver, W. H. (2002). Perspectives on Recent Capital Market Research. The Accounting…”