Are provisions and contingent liabilities priced by the market? An exploratory study in Portugal and the United Kingdom
Autor(a) principal: | |
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Data de Publicação: | 2019 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10071/18096 |
Resumo: | Purpose: This paper aims to examine pricing differences regarding contingencies presented in statements of financial position or notes, which are considered an area for creative accounting. Design/methodology/approach: The authors have chosen two countries with different cultural environments to test the exploratory study. The sample includes companies using the International Accounting Standard (IAS) 37, which requires recognition of provisions while contingent liabilities are only disclosed, implying different impacts from underlying judgement related with contingencies. The authors apply a regression model based on the Ohlson equity-valuation framework. Findings: The most important conclusion is that market participants in both countries follow different patterns when incorporating information about provisions and contingent liabilities. More precisely, the results suggest that provisions are value-relevant, but incrementally less negative in Portugal. Contingent liabilities seem to have no value relevance. However, an exception exists for Portuguese companies having a risk committee board, in which case a significant market valuation of contingent liabilities is found and discounted in share prices. The existence of a risk committee corroborates the value relevance of this board, which is positively valued by market participants in both national cultures. Practical implications: The findings may make a contribution to the IASB research project on the IAS 37 and possible amendments to it (suspended until the revisions to the conceptual framework are finalized) and to the IASB prioritization of communication effectiveness of financial statements to all users. Originality/value: Value relevance of contingencies differentiating countries from two different national cultures and firms with a risk committee on the board of directors. |
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Are provisions and contingent liabilities priced by the market? An exploratory study in Portugal and the United KingdomProvisionsContingent liabilitiesContingenciesCreative accountingNational cultureIAS 37Purpose: This paper aims to examine pricing differences regarding contingencies presented in statements of financial position or notes, which are considered an area for creative accounting. Design/methodology/approach: The authors have chosen two countries with different cultural environments to test the exploratory study. The sample includes companies using the International Accounting Standard (IAS) 37, which requires recognition of provisions while contingent liabilities are only disclosed, implying different impacts from underlying judgement related with contingencies. The authors apply a regression model based on the Ohlson equity-valuation framework. Findings: The most important conclusion is that market participants in both countries follow different patterns when incorporating information about provisions and contingent liabilities. More precisely, the results suggest that provisions are value-relevant, but incrementally less negative in Portugal. Contingent liabilities seem to have no value relevance. However, an exception exists for Portuguese companies having a risk committee board, in which case a significant market valuation of contingent liabilities is found and discounted in share prices. The existence of a risk committee corroborates the value relevance of this board, which is positively valued by market participants in both national cultures. Practical implications: The findings may make a contribution to the IASB research project on the IAS 37 and possible amendments to it (suspended until the revisions to the conceptual framework are finalized) and to the IASB prioritization of communication effectiveness of financial statements to all users. Originality/value: Value relevance of contingencies differentiating countries from two different national cultures and firms with a risk committee on the board of directors.Emerald2019-05-21T16:23:23Z2019-01-01T00:00:00Z20192019-05-21T17:19:23Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10071/18096eng2049-372X10.1108/MEDAR-09-2017-0212Lopes, A. I.Reis, L.info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-11-09T17:57:26Zoai:repositorio.iscte-iul.pt:10071/18096Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T22:29:37.932252Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Are provisions and contingent liabilities priced by the market? An exploratory study in Portugal and the United Kingdom |
title |
Are provisions and contingent liabilities priced by the market? An exploratory study in Portugal and the United Kingdom |
spellingShingle |
Are provisions and contingent liabilities priced by the market? An exploratory study in Portugal and the United Kingdom Lopes, A. I. Provisions Contingent liabilities Contingencies Creative accounting National culture IAS 37 |
title_short |
Are provisions and contingent liabilities priced by the market? An exploratory study in Portugal and the United Kingdom |
title_full |
Are provisions and contingent liabilities priced by the market? An exploratory study in Portugal and the United Kingdom |
title_fullStr |
Are provisions and contingent liabilities priced by the market? An exploratory study in Portugal and the United Kingdom |
title_full_unstemmed |
Are provisions and contingent liabilities priced by the market? An exploratory study in Portugal and the United Kingdom |
title_sort |
Are provisions and contingent liabilities priced by the market? An exploratory study in Portugal and the United Kingdom |
author |
Lopes, A. I. |
author_facet |
Lopes, A. I. Reis, L. |
author_role |
author |
author2 |
Reis, L. |
author2_role |
author |
dc.contributor.author.fl_str_mv |
Lopes, A. I. Reis, L. |
dc.subject.por.fl_str_mv |
Provisions Contingent liabilities Contingencies Creative accounting National culture IAS 37 |
topic |
Provisions Contingent liabilities Contingencies Creative accounting National culture IAS 37 |
description |
Purpose: This paper aims to examine pricing differences regarding contingencies presented in statements of financial position or notes, which are considered an area for creative accounting. Design/methodology/approach: The authors have chosen two countries with different cultural environments to test the exploratory study. The sample includes companies using the International Accounting Standard (IAS) 37, which requires recognition of provisions while contingent liabilities are only disclosed, implying different impacts from underlying judgement related with contingencies. The authors apply a regression model based on the Ohlson equity-valuation framework. Findings: The most important conclusion is that market participants in both countries follow different patterns when incorporating information about provisions and contingent liabilities. More precisely, the results suggest that provisions are value-relevant, but incrementally less negative in Portugal. Contingent liabilities seem to have no value relevance. However, an exception exists for Portuguese companies having a risk committee board, in which case a significant market valuation of contingent liabilities is found and discounted in share prices. The existence of a risk committee corroborates the value relevance of this board, which is positively valued by market participants in both national cultures. Practical implications: The findings may make a contribution to the IASB research project on the IAS 37 and possible amendments to it (suspended until the revisions to the conceptual framework are finalized) and to the IASB prioritization of communication effectiveness of financial statements to all users. Originality/value: Value relevance of contingencies differentiating countries from two different national cultures and firms with a risk committee on the board of directors. |
publishDate |
2019 |
dc.date.none.fl_str_mv |
2019-05-21T16:23:23Z 2019-01-01T00:00:00Z 2019 2019-05-21T17:19:23Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10071/18096 |
url |
http://hdl.handle.net/10071/18096 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
2049-372X 10.1108/MEDAR-09-2017-0212 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Emerald |
publisher.none.fl_str_mv |
Emerald |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
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RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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1799134858584260608 |