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

“One common concern related to the SFAS 142 is that discretions throughout the assessment process afford managers substantial flexibility and create opportunities for managers to manipulate financial outcomes (Holthausen and Watts 2001; Watts 2003; Ramanna 2008; Ramanna and Watts 2012).”

“Related value-relevance research by Collins, Pincus, and Xie (1999), Holthausen and Watts (2001), and Barth, Beaver, and Landsman (2001) reinforces the view that the usefulness of accounting numbers depends on both reporting quality and institutional context.”

“Finally, value relevance studies with Marginal Information Content (Holthausen & Watts, 2001) test whether an accounting number would add some information to investors.”

“Holthausen and Watts (2001) classify the value-relevance studies into three categories: relative association studies, incremental association studies and marginal information content studies.”

“In this way, debt holders can prevent managers from paying excessive fees, while shareholders can leave company-specific assets to debt holders, which are far less than the face value of the debt at the time of liquidation (Holthausen and Watts, 2001).”

“Thus, in liquidation, recorded intangible assets are likely to have zero, or close to zero, value (Holthausen and Watts 2001).”

“The dependent variable in this study was BVPS and EPS which was a reflection of investor valuation and the relevance of information related to the company (Holthausen & Watts, 2001).”

“According to the reviews of Holthausen and Watts (2001) and Ertuğrul (2019a), the VR literature is overwhelmingly dominated by association studies that analyze the VR by considering relative and incremental segments.”

“Timely Loss Recognition We use the timely loss recognition measurement from Barth et al. (2008) in calculating logistic regression as testing hypotheses.”

“Holthausena and Watts [7] argued that, although research related to value relevance has been widely practiced, the impact on standards-making is insignificant.”

“Na primeira, a intenção da gestão está voltada a representar de forma mais justa possível o resultado da empresa (HOLTHAUSEN; LEFTWICH, 1983; WATTS; ZIMMERMAN, 1990; SUBRAMANYAM, 1996; DEMSKI, 1998, DEGEORGE; PATEL; ZECKHAUSER, 1999; BARTH; CRAM; NELSON, 2001).”

“On the econometric perspectives, advantages and disadvantages of two models are studied (Kothari & Zimmerman, 1995; Holthausen & Watts, 2001).”

“The relative weights of those demands, when they differ, determine the final attributes Electronic copy available at: https://ssrn.com/abstract=3094968 13 (Holthausen and Watts 2001).”

“…increase due to firms’ business prospects may be less useful Copyright by author(s); CC-BY 814 The Clute Institute in the bond market than in the stock market (Holthausen & Watts 2001), implying that the kind of useful information may differ across different markets and decision-making problems.”

“Consequently, the research relies on the underlying assumption that a proven and significant association between the aforementioned variables can be seen as convincing evidence of the reliability and relevance of fair value estimates (Barth et al. 2001).”

“2 For example, Holthausen and Watts (2001) states that value relevance studies appear to use two different theories: direct valuation theory and inputs-to-equity valuation theory.”

“In contrast, fair values which are not based on prices from actively traded markets (Levels 2 and 3) are unverifiable and can increase the likelihood of opportunistic disclosure (Holthausen & Watts, 2001; Ramanna & Watts, 2007).”

“Further, an accounting number has a predicted significant relation with share prices (i.e., is value relevant) only if the amount reflects information relevant to investors in valuing the firm and is measured reliably enough to be reflected in share prices (Barth et al. 2001).”

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

“It has been noted that conservatism has evolved more extensively after the FASB’s involvement with financial reporting (Holthausen and Watts, 2001).”

“An accounting number is said to be value relevant if it significantly influences financial statement users’ expectations of value, and these expectations are then incorporated into market prices (see Hung, 2001; Holthausen and Watts, 2001).”

“De mener at formålet er å vurdere tallenes nytte i gjeldende eller kommende regnskapsstandarder (Holthausen & Watts, 2001, s. 4).”

“Hence, if my method were considered incomplete then the same is true for the Khan and Watts (2009) model.”

“The importance is driven by the risk of litigation against auditors (Holthausen and Watts, 2001; Krishnan, 2007).”