The objective of this paper is to observe the Accounting convergence in the reporting for interests in joint controlled entities (JCEs) using the Equity method or the Proportionate consolidation and to explore the determinants that could explain the application of each accounting option. Assuming that the Equity method improves some key performance indicators, firstly we measure the accounting convergence using the van der Tas H index. Secondly, we observe the distribution of both the accounting choices for JCEs and the P/E ratios – as a measure of the firm’s investors reputation – in order to capture if the market rewards firms using the Equity method. Finally, we conduct a Principal Component Analysis (PCA) in order to capture the existence of latent variables able to explicate the different accounting choices. The data source is the Italian listed companies consolidated financial statements for the period 2006-2010 holding JCEs. First remarks show that there is a lack of convergence in the accounting for JCEs. Further, the market seems not to reward companies applying the Equity method. However, the PCA reveals the existence of latent variables that could explain the choice of the reporting method used by the firms of our sample .

Do key performance indicators affect the choice of Equity vs Proportionate consolidation? A Principal Component Analysis for the Italian experience / Catuogno, Simona; Allini, Alessandra; Pulcinelli, Ingrid. - In: JOURNAL OF ECONOMY, BUSINESS AND FINANCING. - ISSN 1339-3723. - 1:1(2013), pp. 60-66.

Do key performance indicators affect the choice of Equity vs Proportionate consolidation? A Principal Component Analysis for the Italian experience

CATUOGNO, SIMONA;ALLINI, ALESSANDRA;PULCINELLI, INGRID
2013

Abstract

The objective of this paper is to observe the Accounting convergence in the reporting for interests in joint controlled entities (JCEs) using the Equity method or the Proportionate consolidation and to explore the determinants that could explain the application of each accounting option. Assuming that the Equity method improves some key performance indicators, firstly we measure the accounting convergence using the van der Tas H index. Secondly, we observe the distribution of both the accounting choices for JCEs and the P/E ratios – as a measure of the firm’s investors reputation – in order to capture if the market rewards firms using the Equity method. Finally, we conduct a Principal Component Analysis (PCA) in order to capture the existence of latent variables able to explicate the different accounting choices. The data source is the Italian listed companies consolidated financial statements for the period 2006-2010 holding JCEs. First remarks show that there is a lack of convergence in the accounting for JCEs. Further, the market seems not to reward companies applying the Equity method. However, the PCA reveals the existence of latent variables that could explain the choice of the reporting method used by the firms of our sample .
2013
Do key performance indicators affect the choice of Equity vs Proportionate consolidation? A Principal Component Analysis for the Italian experience / Catuogno, Simona; Allini, Alessandra; Pulcinelli, Ingrid. - In: JOURNAL OF ECONOMY, BUSINESS AND FINANCING. - ISSN 1339-3723. - 1:1(2013), pp. 60-66.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11588/560005
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