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

“Holthausen and Watts (2001) state that fair value estimates that are not based on prices in active markets are subject to opportunistic estimation.”

“An alternate view, however, is that banks primarily contract on the GAAP numbers reported in financial reports (e.g., Holthausen and Watts, 2001; Watts, 2003; Ball et al., 2008; Moser et al., 2011).”

“Holthausen and Watts, (2001) suggest that value relevance studies use two different theories of accounting and standard setting to draw inferences: Direct valuation theory and Inputs-to equity-valuation theory.”

“Value-relevance studies aim to assess the extent to which accounting data reflect information that is “relevant” for firm value as represented by the stock price (Holthausen & Watts, 2001).”

“Barth et al. (2008) and Bartov et al. (2005) conducted a test to examine the effect of using IFRS on the quality of accounting and the relevance of the value of financial statements in companies originating from varios countries.”

“Three categories of research design have been used in the studies [28], namely relative association, incremental association and marginal information content studies.”

“Holthausen and Watts (2001) state that "what is relevant for one user or user group may not be relevant for another.”

“…process shows significant differences between debtholders and shareholders with respect to the way they are priced, the findings drawn from research on mandatory IFRS adoption to the equity market may not provide general implications about debt financing (Holthausen and Watts 2001; Myers 1984).”

“Finally, as has been discussed in the methodology, value-relevance research designs using abnormal returns of stock prices may suffer from correlated omitted variables because stock price fluctuations incorporate varying information across firms (Soderstrom and Sun, 2007; Holthausen and Watts, 2001), suggesting that i…”

“The search for a conceptual framework for financial reporting led standard-setters to focus on equity valuation models, “value relevance” (Barth et al. , 2001; Holthausen and Watts, 2001) and equity market reactions to new accounting standards as a test of their relevance (Hines, 1989; Young, 2006).”

“According to a large part of the academic literature (Barth et al., 2001; Holthausen and Watts, 2001), the most important quality parameter that makes accounting information useful to investors is the concept of ‘value relevance’, which states that an accounting amount is only ‘value relevant’ if…”

“…the empirical relationship between market-based share price or returns and specific accounting information (mostly book value of equity, earnings and dividend) specifically to assess extent of relationship between them are broadly referred to as the VR literature (Holthausen & Watts, 2001).”

“We are not aware of a broad-based examination of this issue in the US; however, the existence of a similar concern is evidenced by the debate on the relevance of value relevance research to accounting standard setting (Barth, Beaver, & Landsman, 2001; Holthausen & Watts, 2001).”

“…these papers employ price level regression models, they potentially face substantial econometric shortcomings that may undermine their findings (see Holthausen and Watts, 2001).5 The second approach for determining whether the market prices the deferred tax accounts is to examine the change in…”

“For example, the incremental slope coefficient on negative return has been used extensively in the accounting literature to infer conservatism in accounting across countries and legal regimes (Pope and Walker 1999; Bushman and Piotroski 2006), over time (Givoly and Hayn 2000; Holthausen and Watts 2001), in relation to…”

“6 Partly because of these issues, the popularity of value relevance research declined substantially after 2000 (cf. Holthausen & Watts, 2001).”

“Despite these results, value relevance’s usefulness in judging accounting standards is challenged (Barth, Beaver, and Landsman 2001; Holthausen and Watts 2001) Y. Kim, Li, and Li (2012) investigate the effects of IFRS mandatory adoption on the equity market.”

“It is true that, for several authors, value relevance literature’s reported associations between accounting information and common equity valuations have limited implications or inferences for standard setting (as it is possible that they are merely associations) (Holthausen & Watts, 2001).”

“Consistent with this notion, extant research finds that unverifi-able discretion allowed to determine fair value leads to opportunistic behavior (Holthausen & Watts, 2001; Ramanna, 2008; Ramanna & Watts, 2012).”

“The conditional specific area of this study is the area of liquidity risk at SOEs [3], [12], [17].”

“However, Other studies view accounting conservatism as an efficient financial reporting mechanism that increases overall firm value and benefits all corporate stakeholders (Holthausen and Watts 2001; Watts 2003a; Ahmed and Duellman 2007).”

“This relevancy model is used by several researchers namely; [8];[9];[10];[11];[3].”

“More recent studies on value relevance focus on the usefulness of financial information by examining the association between financial measures and share prices (Barth, Beaver, & Landsman, 2001; Francis & Schipper, 1999; Holthausen & Watts, 2001).”

“The research design of this paper is based on the classification of methodological approaches of value relevance studies provided by Holthausen and Watts (2001).”

“(Alford, Jones, Leftwich, & Zmijewski, 1993; Bao & Chow, 1999; Harris, Lang, & Möller, 1994; Joos & Lang, 1994) (Holthausen & Watts, 2001) raise the idea of the ability of the external factors to influence the relevance of accounting information.”

“…impacto de determinadas características ou condições na qualidade da informação contábil, é citado com frequência tanto na literatura internacional (Holthausen & Watts, 2001) quanto na literatura nacional (Hungarato & Lopes, 2008; Macedo et al., 2011), mostrando-se adequado para os objetivos desta…”

“For example, Holthausen and Watts (2001) contend that fair value accounting suggests that the primary purpose of the statement of financial position is that of valuation of the firm, where contracting purposes may require greater conservatism than fair value measurements are prepared to allow.”

“Knowles (2011) suggests that her use of a longer horizon than Beaudoin et al.”

“Piawaian dan nasihat bebas diperkukuhkan lagi melalui Guidelines on Offer Documentation of the Malaysian Code on Take-overs and Mergers yang kini masih diperkemas lagi (Holthausen & Watts, 2001).”

“Researchers reason that accounting conservatism exists in response to economic demand for verifiable and timely information that mitigates agency problems in contracting, and in response to changes in the regulatory and litigation environments (Holthausen and Watts, 2001; Watts, 2003).”

“Indeed, the accounting normalizers would consider several factors which can influence and determine the relevance and the reliability (Holthausen and Watts, 2001, Watts, 2002).”

“…comptables Puisqu’elle concerne directement les méthodes d’évaluation internes ainsi que la politique de diffusion de l’information des entreprises, cette institutionnalisation comptable des règles de bonne gestion n’est pas sans influence sur les marchés financiers (Holthaussen and Watts, 2001).”

“Accounting measures are closely associated with stock returns since they express firms‟ financial performance (Holthausen and Watts, 2001; Kothari, 2001; Beaver, 2002).”

“…previous studies analyse the following: the effect of auditors' exposure to litigation on earnings conservatism (see, e.g. Kothari et al., 1988; Holthausen and Watts, 2001); or the effect of managers litigation exposure as measured by the cross-listed nature of the fi rm, the legal origin or…”

“…prior research has largely established the value relevance of accounting numbers such as earnings and book value of equity ( Francis & Schipper, 1999 ), certain items, like goodwill impairments, remain controversial due to their subjectivity and managerial discretion ( Holthausen & Watts, 2001 ).”

“From an empirical standpoint, the qualitative caliber and transparency of these accounting disclosures directly reshape investor sentiment, thereby driving stock-price adjustments [9, 10].”

“For example, see also Beaver (1993), Watts (1993), Basu (1997), and Holthausen and Watts (2001).”

“…information is considered value-relevant if it has a significant association with stock prices or market returns (Francis & schipper, 1999; holthausen & Watts, 2001). eps and Bvps are widely used indicators in empirical accounting research because they convey critical signals about firm…”

“Gagasan relevansi nilai berkaitan kuat dengan harga saham, para investor dapat menggunakan nilai – nilai ini sebagai informasi akuntansi yang berguna ketika mengevaluasi perusahaan (Holthausen & Watts, 2001).”