The valuation of European financial firms

We extend the recent literature concerning accounting based valuation models to investigate financial firms from six European countries with substantial financial sectors: France, Germany, Italy, Netherlands, Switzerland and the UK. Not only are these crucial industries worthy of study in their own right, but unusual accounting practices, and inter-country differences in those accounting practices, provide valuable insights into the accounting-value relationship. Our sample consists of 7,714 financial firm/years observations from 1,140 companies drawn from 1989-2000. Sub-samples include 1,309 firm/years for banks, 650 for insurance companies, 1,705 for real estate firms, and 3,239 for investment companies. In most countries we find that the valuation models work as well or better in explaining cross-sectional variations in the market-to-book ratio for financial firms as they do for industrial and commercial firms in the same countries, although Switzerland is an exception to this generalization. As expected, the results are sensitive to industrial differences, accounting regulation and accounting practices. In particular, marking assets to market value reduces the relevance of earnings figures and increases that of equity

National culture and earnings management in developed and emerging countries

Purpose This study investigates how the association between national culture and earnings management compares between developed and emerging countries. Design/methodology/approach The empirical analysis relies on a sample of 6,313 firm-year observations from 11 emerging markets and 27,605 firm-year observations from 22 developed countries. The authors use ordinary least squares regression methods to test the hypotheses of the study. Findings Based on Hofstede's (2011) cultural dimensions, the authors find that firms from countries with a higher level of uncertainty avoidance and individualism are less likely to engage in earnings management, but the effect of uncertainty avoidance (individualism) is more (less) pronounced in the emerging countries. Moreover, the authors demonstrate that firms from emerging (developed) countries with higher levels of power distance and masculinity are less (more) likely to engage in earnings management. Finally, the authors find evidence of a trade-off between accruals-based and real earnings management in firms from countries with greater long-term orientation and an indulgence cultural dimension. Originality/value This paper adds to the literature by theoretically discussing and empirically analysing the role that developed and emerging countries' development plays on the effect of national culture on earnings management.info:eu-repo/semantics/acceptedVersio

Mandatory adoption of IFRS and earnings management in emerging countries: the role of national culture

This study examines whether the characteristics of national culture, as proposed by Hofstede, Hofstede and Minkov (2010), are moderating factors on the potential impact of IFRS mandatory adoption on the quality of accounting information in emerging countries. The quality of information was measured through earnings management by accruals, based on the model of Jones (1991) modified by Dechow, Sloan and Sweeney (1995). Through a sample of 2,458 companies from 13 countries, totaling 18,163 firm-year observations, we identified that the dimensions of individualism, masculinity, aversion to uncertainty, long-term orientation and indulgence moderates the impact of IFRS adoption on earnings management levels in emerging countries. It was not possible to identify evidence that the power distance dimension exerts such influence. Overall, this study adds to the literature on the effect of cultural factors on accounting quality.info:eu-repo/semantics/publishedVersio

Jets and jet-like correlations studies from STAR

I present recent results from jets and jet-like correlation measurements from STAR. The pp data are compared to those from Au-Au collisions to attempt to infer information on the medium produced and how hard scattered partons interact with this matter. Results from d-Au events are utilized to investigate the magnitude of cold nuclear matter effects on hard scatterings. The evolution of the underlying event from pp to d-Au collisions is studied. In heavy-ion collisions, background fluctuations are the major source of systematic uncertainties in jet measurements. Detailed studies are therefore being made of these fluctuations and recent progress in our understanding is reported. Jet and jet-hadron correlations results are presented and give clear indications that partonic fragmentation at RHIC is highly modified in the presence of a strongly coupled coloured medium, resulting in a significant broadening and softening of the jet fragments correlation. Finally di-hadron correlations utilizing identified particles as triggers indicate that the "ridge" is stronger for p+K than for pi but that the near-side peak per-trigger yield remains unaltered from d-Au to Au-Au collisions.Comment: Proceedings for QM201

Terminal valuations, growth rates and the implied cost of capital

This article is published with open access at Springerlink.comWe develop a model based on the notion that prices lead earnings, allowing for a simultaneous estimation of the implied growth rate and the cost of equity capital for US industrial sectors. The major difference between our approach and that in prior literature is that ours avoids the necessity to make assumptions about terminal values and consequently about future growth rates. In fact, growth rates are an endogenous variable, which is estimated simultaneously with the implied cost of equity capital. Since we require only 1-year-ahead forecasts of earnings and no assumptions about dividend payouts, our methodology allows us to estimate ex ante aggregate growth and risk premia over a larger sample of firms than has previously been possible. Our estimate of the risk premium being between 3.1 and 3.9 % is at the lower end of recent estimates, reflecting the inclusion of these short-lived companies. Our estimate of the long run growth is from 4.2 to 4.7 %

Soil methane sink capacity response to a long-term wildfire chronosequence in Northern Sweden

Boreal forests occupy nearly one fifth of the terrestrial land surface and are recognised as globally important regulators of carbon (C) cycling and greenhouse gas emissions. Carbon sequestration processes in these forests include assimilation of CO2 into biomass and subsequently into soil organic matter, and soil microbial oxidation of methane (CH4). In this study we explored how ecosystem retrogression, which drives vegetation change, regulates the important process of soil CH4 oxidation in boreal forests. We measured soil CH4 oxidation processes on a group of 30 forested islands in northern Sweden differing greatly in fire history, and collectively representing a retrogressive chronosequence, spanning 5000 years. Across these islands the build-up of soil organic matter was observed to increase with time since fire disturbance, with a significant correlation between greater humus depth and increased net soil CH4 oxidation rates. We suggest that this increase in net CH4 oxidation rates, in the absence of disturbance, results as deeper humus stores accumulate and provide niches for methanotrophs to thrive. By using this gradient we have discovered important regulatory controls on the stability of soil CH4 oxidation processes that could not have not been explored through shorter-term experiments. Our findings indicate that in the absence of human interventions such as fire suppression, and with increased wildfire frequency, the globally important boreal CH4 sink could be diminished

System size and energy dependence of near-side di-hadron correlations

Two-particle azimuthal ($\Delta\phi$) and pseudorapidity ($\Delta\eta$) correlations using a trigger particle with large transverse momentum ($p_T$) in $d$+Au, Cu+Cu and Au+Au collisions at $\sqrt{s_{{NN}}}$ =\xspace 62.4 GeV and 200~GeV from the STAR experiment at RHIC are presented. The \ns correlation is separated into a jet-like component, narrow in both $\Delta\phi$ and $\Delta\eta$, and the ridge, narrow in $\Delta\phi$ but broad in $\Delta\eta$. Both components are studied as a function of collision centrality, and the jet-like correlation is studied as a function of the trigger and associated $p_T$. The behavior of the jet-like component is remarkably consistent for different collision systems, suggesting it is produced by fragmentation. The width of the jet-like correlation is found to increase with the system size. The ridge, previously observed in Au+Au collisions at $\sqrt{s_{{NN}}}$ = 200 GeV, is also found in Cu+Cu collisions and in collisions at $\sqrt{s_{{NN}}}$ =\xspace 62.4 GeV, but is found to be substantially smaller at $\sqrt{s_{{NN}}}$ =\xspace 62.4 GeV than at $\sqrt{s_{{NN}}}$ = 200 GeV for the same average number of participants ($\langle N_{\mathrm{part}}\rangle$). Measurements of the ridge are compared to models.Comment: 17 pages, 14 figures, submitted to Phys. Rev.