Expected earnings growth and the cost of capital: An analysis of accounting regime change in the European financial market

Abacus

Volumn 42, Issue 3-4, 2006, Pages 388-414

  Dargenidou, Christina ^b,c   McLeay, Stuart ^a   Raonic, Ivana ^d  

^a BANGOR UNIVERSITY   (United Kingdom)

^b BANK OF GREECE   (Greece)

^c ATHENS UNIVERSITY OF ECONOMICS AND BUSINESS   (Greece)

^d CITY UNIVERSITY   (United Kingdom)

Author keywords

Abnormal earnings growth; Analysts' forecasts; Cost of capital; Harmonization; International financial reporting standards; Transparency and disclosure

Indexed keywords

EID: 33750027769     PISSN: 00013072     EISSN: 14676281     Source Type: Journal    
DOI: 10.1111/j.1467-6281.2006.00207.x     Document Type: Article

References (51)

1. Abarbanell, J., and R. Lehavy, 'Biased Forecasts or Biased Earnings? The Role of Reported Earnings in Explaining Apparent Bias and Over/Underreaction in Analysts' Earnings Forecasts', Journal of Accounting and Economics, December 2003.
2. Adjaouté, K., and J. P. Danthine, 'Equity Returns and Integration: Is Europe Changing?', Oxford Review of Economic Policy, Winter 2004.
3. Atiase, R., 'Predisclosure Information, Firm Capitalization, and Security Price Behavior Around Earnings Announcements', Journal of Accounting Research, Spring 1985.
4. Ball, R., S. P. Kothari and A. Robin, 'The Effect of International Institutional Factors on Properties of Accounting Earnings', Journal of Accounting and Economics, February 2000.
5. Barth, M. E., G. Clinch and T. Shibano, 'International Accounting Harmonization and Global Equity Markets', Journal of Accounting and Economics, January 1999.
6. Basu, S., and S. Markov, 'Loss Function Assumptions in Rational Expectations Tests on Financial Analysts' Earnings Forecasts', Journal of Accounting Economics, December 2004.
7. Beaver, W. H., and S. G. Ryan, 'Conditional and Unconditional Conservatism: Concepts and Modeling', Review of Accounting Studies, September 2005.
8. Botosan, C. A., and M. A. Plumlee, 'A Re-Examination of Disclosure Level and the Expected Cost of Equity Capital', Journal of Accounting Research, March 2002.
9. _, 'Assessing Alternative Proxies for the Expected Risk Premium', The Accounting Review, January 2005.
10. Botosan, C. A., M. A. Plumlee and Y. Xie, The Role of Information Precision in Determining the Cost of Equity Capital', Review of Accounting Studies, June 2004.
11. Bushee, B. J., and C. Leuz, 'Economic Consequences of SEC Disclosure Regulation: Evidence from the OTC Bulletin Board', Journal of Accounting and Economics, June 2005.
12. Bushman, R. M., J. D. Piotroski and A. J. Smith, 'What Determines Corporate Transparency?', Journal of Accounting Research, May 2004.
13. Bushman, R., Q. Chen, E. Engel and A. Smith, 'Financial Accounting Information, Organizational Complexity and Corporate Governance Systems', Journal of Accounting and Economics, June 2004.
14. Chen, F., B. Jorgensen and Y. Yoo, 'Implied Cost of Equity Capital in Earnings Based Valuation: International Evidence', Accounting and Business Research, Vol. 34, No. 4, 2004.
15. Cuijpers, R., and W. Buijink, 'Voluntary Adoption of Non-Local GAAP in the European Union: A Study of Determinants and Consequences', European Accounting Review, September 2005.
16. Daske, H., 'Economic Benefits of Adopting IFRS or U.S.-GAAP-Have the Expected Costs of Equity Capital Really Decreased?', Journal of Business Finance and Accounting, April/May 2006.
17. Dechow, P., A. Hutton and R. Sloan, The Relation Between Analysts' Forecasts of Long-Term Earnings Growth and Stock Price Performance Following Equity Offerings', Contemporary Accounting Research, Spring 2000.
18. De Bondt, W. F. M., and R. Thaler, 'Do Security Analysts Overreact?', The American Economic Review, May 1990.
19. Easton, P. D., 'PE Ratios, PEG Ratios and Estimating the Implied Expected Rate of Return on Equity Capital', The Accounting Review, January 2004.
20. Estrella, A., and Mishkin, 'The Predictive Power of the Term Structure of Interest Rates in Europe and the United States: Implications for the European Central Bank', European Economic Review, July 1997.
21. García Lara, J. M., and A. Mora, 'Balance Sheet Versus Earnings Conservatism in Europe', European Accounting Review, July 2004.
22. Gietzmann, M., and J. Ireland, 'Cost of Capital, Strategic Disclosures and Accounting Choice', Journal of Business Finance and Accounting, April/May 2005.
23. Giner, B., and W. Rees, 'On the Asymmetric Recognition of Good and Bad News in France Germany and the United Kingdom', Journal of Business Finance and Accounting, November/December 2001.
24. Gode, D., and P. Mohanram, 'Inferring the Cost of Capital Using the Ohlson-Juettner Model', Review of Accounting Studies, December 2003.
25. Gode, D. K., and J. A. Ohlson, 'A Unified Valuation Framework for Dividends, Free Cash Flows, Residual Income, and Earnings Growth Based Models', Working Paper, February 2006 (available at SSRN).
26. Hail, L., 'The Impact of Voluntary Corporate Disclosures on The Ex-Ante Cost of Capital for Swiss Firms', European Accounting Review, December 2002.
27. Hail, L., and C. Leuz, 'Cost of Capital and Cash Flow Effects of U.S. Cross-Listings', ECGI-Finance Working Paper, 2004.
28. _, 'International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter?', Journal of Accounting Research, June 2006.
29. Helbok, G., and M. Walker, 'On the Nature and Rationality of Analysts' Forecasts Under Earnings Conservatism', British Accounting Review, March 2004.
30. Hong, H., and J. D. Kubik, 'Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts', Journal of Finance, February 2003.
31. Hope, O. K., 'Disclosure Practices, Enforcement of Accounting Standards, and Analysts' Forecast Accuracy: An International Study', Journal of Accounting Research, May 2003.
32. Hribar, P., and N. T. Jenkins, 'The Effect of Accounting Restatements on Earnings Revisions and the Estimated Cost of Capital', Review of Accounting Studies, June 2004.
33. Irvine, P. J., 'Analysts' Forecasts and Brokerage-Firm Trading', The Accounting Review, January 2004.
34. Khanna, T., K. G. Palepu and S. Srinivasan, 'Disclosure Practices of Foreign Companies Interacting with U.S. Markets', Journal of Accounting Research, May 2004.
35. Land, J., and M. H. Lang, 'Empirical Evidence on the Evolution of International Earnings', Accounting Review, October 2002.
36. Lang, M. H., K. V. Lins and D. P. Miller, 'ADRs, Analysts, and Accuracy: Does Cross-Listing in the United States Improve a Firm's Information Environment and Increase Market Value?', Journal of Accounting Research, May 2003.
37. Lang, M. H., J. S. Raedy and W. Wilson, 'Earnings Management and Cross-Listing: Are Reconciled Earnings Comparable to US Earnings?', Journal of Accounting and Economics, September 2006.
38. Leuz, C., 'IAS versus U.S. GAAP: Information-Asymmetry-Based Evidence from Germany's New Market', Journal of Accounting Research, June 2003.
39. Leuz, C., D. Nanda and P. D. Wysocki, 'Earnings Management and Investor Protection: An International Comparison', Journal of Financial Economics, September 2003.
40. Leuz, C., and R. E. Verrecchia, 'The Economic Consequences of Increased Disclosure', Journal of Accounting Research, Supplement 2000.
41. Levitt, A., 'The Importance of High Quality Accounting Standards', Accounting Horizons, March 1998.
42. Lin, H. W., and M. F. McNichols, 'Underwriting Relationships, Analysts' Earnings Forecasts and Investment Recommendations', Journal of Accounting and Economics, February 1998.
43. McGregor, W., 'An Insider's View of the Current State and Future Direction of International Accounting Standard Setting', Accounting Horizons, June 1999.
44. Michael, B. M., B. R. Walther and R. H. Willis, 'Does Forecast Accuracy Matter to Security Analysts?', The Accounting Review, April 1999.
45. Miller, M. H., and F. Modigliani, 'Dividend Policy, Growth, and the Valuation of Shares', Journal of Business, October 1961.
46. Ohlson, J., and B. Juettner-Nauroth, 'Expected EPS and EPS Growth as Determinants of Value', Review of Accounting Studies, September 2005.
47. Piotroski, J. D., and D. T. Roulstone, 'The Influence of Analysts, Institutional Investors, and Insiders on the Incorporation of Market, Industry, and Firm-Specific Information Into Stock Prices', The Accounting Review, October 2004.
48. Pope, P., and M. Walker, 'International Differences in the Timeliness Conservatism and Classification of Earnings', Journal of Accounting Research, Supplement, 1999.
49. Raonic, I., S. McLeay and I. Asimakopoulos, 'The Timeliness of Income Recognition by European Companies: An Analysis of Institutional and Market Complexity', Journal of Business Finance and Accounting, January 2004.
50. Standard and Poor's, Transparency and Disclosure Study-Frequently Asked Questions, www.standardandpoors.com, 2002.
51. Yee, K. K., 'Forward Versus Trailing Earnings in Equity Valuation', Review of Accounting Studies, June 2004.