Our paper intends to analyze the relation between the comparability of financial statements and the market reaction to the differing accounting choices for the consolidation of interests in joint controlled entities (JCEs). Assuming that differences between the Proportionate consolidation and the Equity method on the financial statement of the venturer mainly refer to the total assets, total liabilities, total revenues and total expenses, without changes in terms of equity and net income, we formulate some starting assumptions. Considering the previous literature and the assumptions above, the current study aims to contribute to the literature by exploring the following main research question: which is the market reaction on price/earnings deriving from the two different accounting treatments? To provide first results, we are going to measure accounting comparability through Herfindhal index related to the differing accounting choices for the consolidation of interests in joint controlled entities (JCEs), hence we conduct a descriptive analysis, whose aim is to describe the distribution of the 21 Italian groups, each years from 2004 to 2010 based on two parameters, Price/Earnings and method of consolidation for JCE’s, with the purpose to verify if the market is able to capture the above mentioned lack of comparability deriving from a multiple accounting option.

The market reaction to the consolidation of JCEs in Italian listed companies: evidences from the current financial reporting convergence / Catuogno, Simona; Allini, Alessandra; Pulcinelli, Ingrid. - (2012). (Intervento presentato al convegno Financial Reporting Workshop tenutosi a Napoli, Villa Doria d’Angri nel 14-15 giugno 2012).

The market reaction to the consolidation of JCEs in Italian listed companies: evidences from the current financial reporting convergence

CATUOGNO, SIMONA;ALLINI, ALESSANDRA;PULCINELLI, INGRID
2012

Abstract

Our paper intends to analyze the relation between the comparability of financial statements and the market reaction to the differing accounting choices for the consolidation of interests in joint controlled entities (JCEs). Assuming that differences between the Proportionate consolidation and the Equity method on the financial statement of the venturer mainly refer to the total assets, total liabilities, total revenues and total expenses, without changes in terms of equity and net income, we formulate some starting assumptions. Considering the previous literature and the assumptions above, the current study aims to contribute to the literature by exploring the following main research question: which is the market reaction on price/earnings deriving from the two different accounting treatments? To provide first results, we are going to measure accounting comparability through Herfindhal index related to the differing accounting choices for the consolidation of interests in joint controlled entities (JCEs), hence we conduct a descriptive analysis, whose aim is to describe the distribution of the 21 Italian groups, each years from 2004 to 2010 based on two parameters, Price/Earnings and method of consolidation for JCE’s, with the purpose to verify if the market is able to capture the above mentioned lack of comparability deriving from a multiple accounting option.
2012
The market reaction to the consolidation of JCEs in Italian listed companies: evidences from the current financial reporting convergence / Catuogno, Simona; Allini, Alessandra; Pulcinelli, Ingrid. - (2012). (Intervento presentato al convegno Financial Reporting Workshop tenutosi a Napoli, Villa Doria d’Angri nel 14-15 giugno 2012).
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11588/459612
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