The value relevance of voluntary disclosure in the annual report

This paper examines if the level of voluntary disclosure affects the association between current returns and future earnings. Economic theory suggests that firms might find it advantageous to provide additional pieces of information (i.e., voluntary disclosure) to investors and analysts (Verrecchia 1983). Our results indicate that more voluntary disclosure does not improve the association between current returns and future earnings; i.e. current returns do not reflect more future earnings news. This finding raises the question whether voluntary information in the annual report contains value relevant information about future earnings or if investors are simply not capable of incorporating voluntary information in the firm value estimates. Key words: Disclosure, future earnings, informativenes

The effect of stock pay and stock holdings on the pay to performance sensitivity in Denmark

We explore the impact of stock pay and stock holdings on the pay to performance sensitivity in Denmark. Our research is motivated by the fact that most non-UK/US studies ignore stock based pay and stock holdings when measuring the pay to performance sensitivity. Further, most studies that explore the pay to performance relation apply the Black and Scholes approach assuming that the executive is both risk neutral due to hedge possibilities and well diversified. However, as pointed by Hall and Murphy (2002) executives are neither risk neutral nor well diversified. We adopt the certainty equivalence approach developed by Lambert et al (1991) to demonstrate that in a setting where executives are risk averse and undiversified there is a gap between the cost of granting stock options and the value, which executives receive from the same stock option program. Our findings indicate that the Danish level of pay is lower than in the UK and the US but more in line with the pay in other Scandinavian countries. Further, our results show that stock options are less frequently used to compensate Danish executives. On the other hand, stock ownership seems to be a more popular way to align the interests of the management and the shareholders than stock options. Furthermore, including stock holdings affect our four pay to performance sensitivity measures significantly. We also demonstrate that the pay to performance sensitivity is considerably lower than indicated by the Black and Scholes approach. Finally, the pay to performance sensitivity is on average smaller in Denmark than in the US. However, the pay to performance sensitivity seems similar in Denmark and the UK

Determinants of executive compensation in privately held firms

We examine what determines executive compensation in privately held firms. Our study is motivated by the fact that most studies in this area rely on data from publicly traded firms. Further, the few studies that are based on data from privately held firms only examine a limited number of determinants of executive compensation. Our findings indicate that the pay to performance relation is weak. Board size and ownership concentration are the only corporate governance characteristics that explain variations in executive compensation. Executive characteristics like skills, title and educational attainment all explain variations in executive compensation. Contrary to our expectations we do not find a stronger pay to performance relation in firms with better designed bonus plans

Transparency, disclosure and the pricing of future earnings in the European market

Paper presented at "Accounting at a Tipping Point", the American Accounting Association (AAA) Annual Meeting held in New York City on August 1-5, 2009. Final version published in Journal of Business Finance and Accounting until title Accruals, Disclosure and the Pricing of Future Earnings in the European Market. Available online at http://onlinelibrary.wiley.com/The present study examines the role of disclosure in assisting market participants to form expectations of future earnings by observing the accrual content of reported earnings. Accounting research has been focusing on investigating the ability of accounting numbers and practices to provide relevant information to market participants. In the context of the association between market returns and accounting numbers or practices, conclusions can be only drawn on the effect of these numbers and practices at an average level of disclosure. Here it is shown that these conclusions can be significantly altered at varying levels of disclosure. Employing a sample of European firms and their Transparency and Disclosure ratings conducted by Standard and Poor’s, we show how disclosure and accruals jointly affect earnings expectations that are included in current stock returns. It is shown that both the joint effect of disclosure and accruals depends on the magnitude, sign and the nature of accruals (i.e. current and non-current accruals), and that increased disclosure appears to correct overstated expectations arising mostly from the extensive use of current accruals and negative non-current accruals

R&D innovation indicator and its effects on the market. An empirical assessment from a financial perspective

We propose an alternative firm-level measure for innovation activities—R&D elasticity—and we analyse its effects on the Tobin's Q of listed companies on the Euronext 100 Index. We find that R&D elasticity is positively related to market appreciation by stakeholder investors. Moreover, we analyse the role of default risk in the relationship between innovation activities and market value, and find that firms' default probabilities are negatively related to Tobin's Q. These findings are supported by OLS regressions, wherein Tobin's Q is regressed on R&D elasticity, five-year default probability, and controls such as ESG voluntary disclosure. These results further the research aimed at developing a conceptual framework for integrating at a policy level the R&D elasticity indicator as a type of innovation disclosure among the non-financial disclosures released by companies

Reduced Inspiratory Muscle Strength in Patients with Type 2 Diabetes Mellitus and Obstructive Sleep Apnoea

Background. Obstructive sleep apnoea (OSA) is related to type 2 diabetes (T2DM), and it may be associated with reduced inspiratory muscle strength (IMS). The aim of this study was to investigate the IMS in patients with T2DM, with or without OSA. Methods. Patients with T2DM with OSA (n=33) and without OSA (n=28) were included. The maximum IMS was tested using the POWERbreathe KH2 device. Reference IMS values were data calculated using an algorithm based on general populations and adjusted for age and gender. Results. There was no difference in IMS between the OSA group (median (range) 77 (35–124) cmH2O) and the non-OSA group (84 (33–122) cmH2O) (p=0.97). The IMS values were reduced in the OSA group compared with the reference values (92.9 (62.3–100.0) cmH2O) (p=0.030), whereas the non-OSA group did not have reduced IMS. When the IMS values of all T2DM patients were compared with reference values, the IMS values were 79 (33–124) cmH2O and 93.8 (62.3–102.4) cmH2O, respectively (p=0.017). Conclusion. No difference in IMS between patients with T2DM with or without OSA was found. However, patients with T2DM and OSA had reduced IMS compared with age- and gender-matched references whereas the non-OSA group did not have reduced IMS