CONSIDERATIONS ON REORGANIZATION. A COMPARISON OF REORGANIZATION RATES IN EASTERN EUROPE

In our paper, we discuss reorganization from two points of view: its purpose and the choice between reorganization and liquidation, by reviewing the existing literature. After setting an appropriate theoretical base for interpretation, we focus on comparireorganization rate, reorganization versus liquidation, Eastern Europe

Labor Costs of Implementing New Accounting Standards

While much research focuses on the informational benefits of new accounting standards, the costs of implementing new standards remain unclear. We examine the adoption of two new major standards: lease accounting and revenue recognition. We find increase in the number of accounting job postings, related to those standards, in standards’ issuance years. Firms most affected by new standards, measured by accounting complexity and early adoption behavior, post higher number of accounting jobs. We estimate incremental labor costs at about 30 percent of median audit fees for each standard for the most affected firms. These costs, as a percentage of their total employee cost, are higher for smaller firms, indicating greater regulatory-compliance burden. We provide large-sample evidence on the direct labor costs, and thus on the lower bound of implementation costs associated with new accounting standards. Our findings should interest standard setters as they evaluate cost-benefit tradeoffs before issuing new standards

The Effects of MiFID II on Sell-Side Analysts, Buy-Side Analysts, and Firms

This paper provides early but broad empirical evidence on a major new investor protection regulation in Europe, MiFID II, which requires investment firms to unbundle investment research from other costs they charge to clients. We predict that the price separation resulting from unbundling and a hard-dollar system leads to a shrinking of the market for sell-side investment research, manifested in lower quantity of sell-side coverage that is of higher quality than before the regulation. We test our predictions in difference-in-differences matched-sample research designs with firm fixed effects. We find a decrease in the number of sell-side analysts covering European firms after MiFID II implementation, particularly for firms that are less important to the sell-side. However, research quality improves; specifically, individual analyst forecasts are more accurate and stock recommendations garner greater market reactions. In addition, sell-side analysts seem to cater more to the buy-side after MiFID II by providing industry recommendations along with stock recommendations. Importantly, we predict and find evidence that buy-side investment firms turn to more in-house research after MiFID II implementation. Equally interesting, buy-side analysts increase their participation and engagement in earnings conference calls compared to the control group. Finally, we find some evidence that stock-market liquidity decreases post-MiFID II. Our findings have implications beyond Europe, as investors are currently pressuring the U.S. Securities and Exchange Commission to adopt a similar regulation

Three essays on operating segment disclosure

Cette thèse contient trois essais distincts sur la publication d’information sectorielle que les entreprises européennes ayant plusieurs secteurs opérationnels effectuent en vertu des IFRS 8 Secteurs Opérationnels. Chaque essai vise à améliorer notre compréhension collective sur la politique de communication financière des cadres dirigeants en examinant diverses caractéristiques des informations sectorielles. Le chapitre I, “L’interaction entre la qualité et la quantité des publications sur l’information sectorielle” examine le choix des cadres dirigeants à l'égard de la quantité et de la qualité, ainsi que l’utilité de ces deux caractéristiques pour les analystes financiers. J’utilise le nombre de segments opérationnels publiés comme mesure quantitative et la variation inter-sectorielle de la profitabilité comme mesure qualitative et soutiens que plus de pouvoir discrétionnaire peut être exercé par les dirigeants sur la qualité que sur la quantité. Je trouve que les cadres dirigeants résolvent les préoccupations liées aux renseignements commerciaux de nature exclusive soit en déviant de a quantité recommandée par la norme, ou, lorsqu’ils suivent la norme, en réduisant la qualité de l’information sectorielle. Les analystes financiers n’apprécient pas toujours la qualité de l’information sectorielle, ce qui suggère que le modèle business crée des difficultés même pour des utilisateurs avertis. Mes résultats informent les normalisateurs lorsque ceux-ci initient le développement d’un nouveau cadre conceptuel et lorsqu’ils semblent envisager l’approche du modèle business pour le reporting. Le chapitre II s'intitule «La non-conformité des secteurs opérationnels à travers des documents d'entreprise. » Les régulateurs de marché examinent des cas de présentations lorsqu'une entreprise fournit des informations différentes sur le même sujet dans différents documents. En mettant l’accent sur les secteurs opérationnels, cet essai utilise des données recueillies manuellement auprès de quatre documents d’entreprise afin d'analyser l'impact de la publication d’information non-conforme sur l’exactitude des prévisions de résultat des analystes financiers. La non-conformité qui découle de la déségrégation supplémentaire des secteurs semble introduire de nouveautés et contribue à l’exactitude des prévisions. La publication des segmentations difficilement réconciliables entraine une exactitude réduite des prévisions. Ces résultats contribuent à notre compréhension des effets de la politique de communication des dirigeants à travers plusieurs documents et ont des répercussions sur le travail les régulateurs. Le chapitre III s'intitule « Prévisions managériales au niveau sectoriel. » Je considère les prévisions au niveau sectoriel (PNS) comme un type d'information désagrégé que les entreprises fournissent ensemble avec leur stratégie de gestion. J’examine l’utilité de cette information pour l’exactitude des prévisions de résultat par les analystes ainsi que l’impact de cette information sur la manipulation du résultat. Je constate que les entreprises de haute technologie réputées pour l’incertitude supplémentaire liée à profitabilité sont moins susceptibles de fournir des PNS et que le PNS est associé à une prévision améliorée. Cependant, alors que la communication de davantage de PNS désagrégé par secteur a tendance à améliorer la précision, plus de précision ne semble pas avoir d’importance. Du point de vue des cadres dirigeants, les PNS les incitent à manipuler le résultat comptable, mais le PNS désagrégé par poste semble décourager la manipulation, fort probablement due à une surveillance supplémentaire. Dans un contexte où une orientation narrative et désagrégée est considérée comme la solution pour empêcher la vision à court terme, comprendre quel type d'information permet d’atteindre cet objectif, et de quelle manière, est tout autant pertinent pour les cadres dirigeants, les investisseurs et les régulateurs.This thesis contains three stand-alone essays on the operating segment disclosures that European multi-segment companies make under IFRS 8 Operating Segments. Each essay aims to improve our collective understanding about managers’ disclosure strategy by examining various characteristics of operating segment disclosure. Chapter I, entitled “The Interplay between Segment Disclosure Quantity and Quality,” investigates managers’ choices with respect to both disclosure quantity and disclosure quality, and the usefulness of these two characteristics for financial analysts. Focusing on segment disclosures under the management approach, I measure quantity as the number of segment-level line items and quality as the cross-segment variation in profitability, and argue that greater managerial discretion can be exercised over quality than over quantity. I hypothesize and find that managers solve proprietary concerns either by deviating from the suggested line-item disclosure in the standard, or if following standard guidance, by decreasing segment reporting quality. Moreover, financial analysts do not always understand the quality of segment disclosures, which suggests that a business-model type of standard creates difficulties even for sophisticated users. My results inform standard setters as they start working on a disclosure framework and as they seem to consider the business model approach to financial reporting. Chapter II is entitled “Inconsistent Segment Disclosure across Corporate Documents.” Market regulators in the U.S. and Europe investigate cases of inconsistent disclosures when a company provides different information on the same topic in different documents. Focusing on operating segments, this essay uses hand-collected data from four different corporate documents of multi-segment firms to analyze the impact of inconsistent disclosure on financial analysts’ earnings forecast accuracy. Inconsistencies that arise from further disaggregation of operating segments in some documents seem to bring in new information and increase analyst accuracy. However, when analysts must work with different, difficult-to-reconcile segmentations, their information processing capacity and forecasts are less accurate. These findings contribute to our understanding of the effects of managers’ disclosure strategy across multiple documents and have implications for regulators and standard setters’ work on a disclosure framework. Chapter III is entitled “Management Guidance at the Segment Level.” Prior research has found that managers add information to their earnings guidance to justify, explain, or contextualize their forecasts. I identify segment-level guidance (SLG) as a type of disaggregated information that multi-segment firms provide with their management guidance, and investigate its usefulness for financial analysts’ earnings forecasting accuracy, as well as its influence on managers’ earnings fixation. I further characterize the level of precision (point and range, maximum or minimum estimate, or simply narrative) and of disaggregation of SLG. I find that companies in high tech industries known for increased uncertainty in future performance are less likely to provide SLG, and that SLG is associated with better forecasting accuracy. However, while providing more item-disaggregated SLG improves accuracy, increased precision has no impact on forecast accuracy. From the manager’s point of view, SLG creates incentives to engage in earnings management, and the more precise the SLG is the greater the incentive. In contrast, more item-disaggregated SLG discourages earnings management, perhaps by improving monitoring. In a context where qualitative, narrative, and disaggregated guidance is regarded as a solution to avoid earnings fixation and short termism, understanding which types of information achieve this goal, and how, is relevant for managers, investors, and regulators alike

Trois essais sur la publication de l'information sectorielle

This thesis contains three stand-alone essays on the operating segment disclosures that European multi-segment companies make under IFRS 8 Operating Segments. By examining various characteristics of disclosure about operating segments using manually-collected data from a range of public corporate documents, this thesis improves our collective understanding about managers’ overall disclosure strategy for financial and accounting information. The findings in each essay have practical implications for standard setters and regulators in particular, as well as for capital market investors and financial analysts.Chapter I, entitled “The Interplay between Segment Disclosure Quantity and Quality,” investigates managers’ choices with respect to both disclosure quantity and disclosure quality, and the usefulness of these two characteristics for financial analysts. Focusing on segment disclosures under the management approach, I measure quantity as the number of segment-level line items and quality as the cross-segment variation in profitability, and argue that greater managerial discretion can be exercised over quality than over quantity. I hypothesize and find that managers solve proprietary concerns either by deviating from the suggested line-item disclosure in the standard, or if following standard guidance, by decreasing segment reporting quality. Moreover, financial analysts do not always understand the quality of segment disclosures, which suggests that a business-model type of standard creates difficulties even for sophisticated users. My results inform standard setters as they start working on a disclosure framework and as they seem to consider the business model approach to financial reporting. Chapter II is entitled “Inconsistent Segment Disclosure across Corporate Documents.” Market regulators in the U.S. and Europe investigate cases of inconsistent disclosures when a company provides different information on the same topic in different documents. Focusing on operating segments, this essay uses hand-collected data from four different corporate documents of multi-segment firms to analyze the impact of inconsistent disclosure on financial analysts’ earnings forecast accuracy. Inconsistencies that arise from further disaggregation of operating segments in some documents seem to bring in new information and increase analyst accuracy. However, when analysts must work with different, difficult-to-reconcile segmentations, their information processing capacity and forecasts are less accurate. These findings contribute to our understanding of the effects of managers’ disclosure strategy across multiple documents and have implications for regulators and standard setters’ work on a disclosure framework. Chapter III is entitled “Management Guidance at the Segment Level.” Prior research has found that managers add information to their earnings guidance to justify, explain, or contextualize their forecasts. I identify segment-level guidance (SLG) as a type of disaggregated information that multi-segment firms provide with their management guidance, and investigate its usefulness for financial analysts’ earnings forecasting accuracy, as well as its influence on managers’ earnings fixation. I further characterize the level of precision (point and range, maximum or minimum estimate, or simply narrative) and of disaggregation of SLG. I find that companies in high tech industries known for increased uncertainty in future performance are less likely to provide SLG, and that SLG is associated with better forecasting accuracy. However, while providing more item-disaggregated SLG improves accuracy, increased precision has no impact on forecast accuracy. From the manager’s point of view, SLG creates incentives to engage in earnings management, and the more precise the SLG is the greater the incentive. In contrast, more item-disaggregated SLG discourages earnings management, perhaps by improving monitoring. In a context where qualitative, narrative, and disaggregated guidance is regarded as a solution to avoid earnings fixation and short termism, understanding which types of information achieve this goal, and how, is relevant for managers, investors, and regulators alike.Cette thèse contient trois essais distincts sur la publication d’information sectorielle que les entreprises européennes ayant plusieurs secteurs opérationnels effectuent en vertu des IFRS 8 Secteurs Opérationnels. Chaque essai vise à améliorer notre compréhension collective sur la politique de communication financière des cadres dirigeants en examinant diverses caractéristiques des informations sectorielles. Les résultats de cette thèse informent les normalisateurs en particulier, ainsi que les investisseurs sur les marches du capital et les analystes financiers.Le chapitre I, «L’interaction entre la qualité et la quantité des publications sur l’information sectorielle» examine le choix des cadres dirigeants à l'égard de la quantité et de la qualité, ainsi que l’utilité de ces deux caractéristiques pour les analystes financiers. J’utilise le nombre de segments opérationnels publiés comme mesure quantitative et la variation inter-sectorielle de la profitabilité comme mesure qualitative et soutiens que plus de pouvoir discrétionnaire peut être exercé par les dirigeants sur la qualité que sur la quantité. Je trouve que les cadres dirigeants résolvent les préoccupations liées aux renseignements commerciaux de nature exclusive soit en déviant de la quantité recommandée par la norme, ou, lorsqu’ils suivent la norme, en réduisant la qualité de l’information sectorielle. Les analystes financiers n’apprécient pas toujours la qualité de l’information sectorielle, ce qui suggère que le modèle business crée des difficultés même pour des utilisateurs avertis. Mes résultats informent les normalisateurs lorsque ceux-ci initient le développement d’un nouveau cadre conceptuel et lorsqu’ils semblent envisager l’approche du modèle business pour le reporting. Le chapitre II s'intitule «La non-conformité des secteurs opérationnels à travers des documents d'entreprise. » Les régulateurs de marché examinent des cas de présentations lorsqu'une entreprise fournit des informations différentes sur le même sujet dans différents documents. En mettant l’accent sur les secteurs opérationnels, cet essai utilise des données recueillies manuellement auprès de quatre documents d’entreprise afin d'analyser l'impact de la publication d’information non-conforme sur l’exactitude des prévisions de résultat des analystes financiers. La non-conformité qui découle de la déségrégation supplémentaire des secteurs semble introduire de nouveautés et contribue à l’exactitude des prévisions. La publication des segmentations difficilement réconciliables entraine une exactitude réduite des prévisions. Ces résultats contribuent à notre compréhension des effets de la politique de communication des dirigeants à travers plusieurs documents et ont des répercussions sur le travail les régulateurs. Le chapitre III s'intitule « Prévisions managériales au niveau sectoriel. » Je considère les prévisions au niveau sectoriel (PNS) comme un type d'information désagrégé que les entreprises fournissent ensemble avec leur stratégie de gestion. J’examine l’utilité de cette information pour l’exactitude des prévisions de résultat par les analystes ainsi que l’impact de cette information sur la manipulation du résultat. Je constate que les entreprises de haute technologie réputées pour l’incertitude supplémentaire liée à profitabilité sont moins susceptibles de fournir des PNS et que le PNS est associé à une prévision améliorée. Cependant, alors que la communication de davantage de PNS désagrégé par secteur a tendance à améliorer la précision, plus de précision ne semble pas avoir d’importance. Du point de vue des cadres dirigeants, les PNS les incitent à manipuler le résultat comptable, mais le PNS désagrégé par poste semble décourager la manipulation, fort probablement due à une surveillance supplémentaire. Dans un contexte où une orientation narrative et désagrégée est considérée comme la solution pour empêcher la vision à court terme, comprendre quel type d'information permet d’atteindre cet objectif, et de quelle manière, est tout autant pertinent pour les cadres dirigeants, les investisseurs et les régulateurs

Accounting for intangible assets – insights from meta-analysis of R&D research

International audiencePurpose The knowledge- and Internet-based economy demands a reexamination of the accounting treatment for intangibles and a thorough understanding of the empirical evidence on this topic. Design/methodology/approach The study reviews the literature on research and development (R&D), a specific internally developed intangible asset, using meta-analysis techniques that allow to highlight the areas of consensus and disagreement in quantitative empirical results. The literature the authors review addresses four main research questions on (1) the determinants of the decision to capitalize R&D, (2) stock market-based outcomes of capitalizing R&D, (3) firm-based outcomes related to expensing R&D and (4) stock market-based outcomes of expensing R&D. Findings The authors find higher value relevance of capitalized compared with expensed R&D. There is, however, little robust evidence on the determinants of the capitalization decision and the characteristics of capitalizers. Originality/value The authors conclude by highlighting future research that can allow accounting academics to contribute to standard setting

CONSIDERATIONS ON REORGANIZATION. A COMPARISON OF REORGANIZATION RATES IN EASTERN EUROPE

In our paper, we discuss reorganization from two points of view: its purpose and the choice between reorganization and liquidation, by reviewing the existing literature. After setting an appropriate theoretical base for interpretation, we focus on compar