Forward-Looking Disclosures, Financial Verifiability and Analysts' Forecasts : A Study of Cross-Listed European Firms

Forward-looking disclosures are a crucial source of information when valuing a company. We study the effect of forward-looking disclosures on analysts’forecast properties, in particular accuracy and dispersion. Our sample includes all the non-financial firms from Italy, Germany, France and Switzerland that in year 2002 were cross-listed on local stock exchanges and on the New York Stock Exchange. We conduct a content analysis on the Annual Report and the 20F form of these companies for the years 2002, 2003 and 2004. We differentiate between forwardlooking information on the basis of the disclosure of expected effects on future financial performance and the disclosure of a measure of this impact. We define forward-looking information disclosed with the characteristics of being quantified and directed (and financial) as financially verifiable as it facilitates the comparison with its subsequent realisation in relation to expected future financial performance. Our analysis finds support for the theoretical prediction that verifiable disclosures are more effective than unverifiable disclosures at improving accuracy and reducing dispersion of analysts’ forecasts. Our sample also allows us to explore the effects of the difference between the degrees of verifiability between forward-looking disclosures of the 20F form versus those of the domestic annual report. Our analysis provides empirical support for the hypotheses that these differences are significant and have a significant effect on forecast properties

Amendments to IAS 41 and IAS 16: implications for accounting for bearer plants

3noopenUnder IAS-IFRS standards agriculture activity is accounted for using a fair value model. In 2014, the IASB amended the accounting treatment for bearer plants with the aim to address some concerns that have emerged since the application of IAS 41. The amendments require that bearer plants be accounted for like property, plant and equipment (IAS 16). In this paper we analyse the theoretical aspects introduced by these amendments, moving from the IASB project. In particular we explain the reasons that led to these amendments and exploring whether all the concerns previously identified by accounting scholars and practitioners have been addressed. Moreover, we identify some possible obstacles to the practical application of the amendments to IAS 41.openBozzolan, S.; Laghi, E.; Mattei, M.Bozzolan, Saverio; Laghi, E.; Mattei, M

Signing the Letter to Shareholders: Does the Signatory\u2019s role relate to disclosure tone?

In this paper, we study whether and how disclosure tone in the letter to shareholders (LTS) is related to the role of signatory (i.e. the person whose signature appears in the letter). We expect that disclosure tone is associated with the Signatory role because of the incentives to be involved in optimistically toned disclosure. We find that optimistic tone is more present when Insiders (executives or major shareholders) sign the LTS. We also find that the highest level of optimistic tone is when the signatory holds an executive position and is not a major shareholder. In general terms, our evidence suggests that the dichotomous classification between Insiders and Independent Directors is not sufficient to explain cross-sectional variation in disclosure behavior

Family Ownership and Impression Management: An Integrated Approach

According to agency theory, impression management is lower in family-owned firms because of reduced agency I conflicts. However, when family owners are present, agency I conflicts are superseded by agency II conflicts between controlling and minority shareholders, leading to a positive association between impression management and family ownership. Moreover, family owners have distinct goals related to the preservation of socioemotional wealth (SEW) that may influence agency conflicts. We formalize these countervailing forces by developing an integrated theoretical framework that considers both agency I and agency II conflicts and how they interact with SEW-related motives. We hypothesize that the coexistence of agency I and agency II conflicts in family-owned firms leads to a U-shaped association between family ownership and impression management. We also expect that this U-shaped association is flatter when family influence on the board is stronger and SEW motives shape more corporate choices. We test our predictions by analyzing the letters to shareholders of 77 Italian-listed firms from 2008 to 2015. The results confirm our expectations and hold when we use instrumental variable estimation, alternative proxies to capture SEW motives, and impression management measure