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The Value Relevance of Brazilian Accounting Numbers an

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The Value Relevance of Brazilian Accounting Numbers an Powered By Docstoc
					Corporate Governance and
Financial Reporting in
Brazil


 Alexsandro Broedel Lopes, PhD

 broedel@usp.br
Alexsandro Broedel Lopes
 Assistant Professor, USP
 Member of the Education Advisory Board –
  IASB
 Former positions at the London School of
  Economics, University of Manchester and
  Fundação Getúlio Vargas
 Author of five books and several articles
  published internationally on topics related
  to accounting and finance
 Member of the Corporate Reporting and
  Auditing Research Center – Universtiy of
  Manchester
Presentation
 Motivation
 Related Research
 Brazilian Corporate Financial Reporting
  System
 Brazilian Capital Markets
 Models and Hypothesis
 Data and Results
 Conclusions
Motivation
 Value relevance is the major venue in the
  capital markets research paradigm
 There is almost no evidence from emerging
  markets (Mexico is the exception)
 Inefficient (?) markets make accounting
  more or less relevant?
   Price formation
   Competition
 Institutional factors provide a ‘laboratory’
  to test existing theories
Related Research
 Ball et all (2001): common law countries
  have more conservative and value relevant
  accounting
 Ali and Hwang (2000): show that value
  relevance decreases with:
     Bank-oriented systems
     Government regulation
     Continental model
     High influence of tax rules
     Inverse of the amount spend on auditing
Related Research
 Ball and Shivakumar (2002): show
  lower conservatism for private than
  public British companies. Why?
   No trading
   Concentrated ownership
Brazilian Corporate
Financial Reporting System
 Government issues all standards
 High discretionary power
  (revaluations, R&D etc)
 Strong tax influence
 Poor disclosure (pensions, derivatives
  etc)
 Poor compliance (devaluation etc)
Brazilian Capital Markets
   Concentrated ownership
   Poor governance
   Bank oriented system
   State participation
   Fill at least four of Ali and Hwang
    (2001) ‘worst’ criteria
Models and Hypothesis
 Hypothesis
  Earnings are not relevant
    No function as reducers of
     information asymmetry
  Book values dominate
  Earnings are not conservative
  Concentration vs. Trading
Data and Results
 Bovespa, Economática, 1995-1999
 Major Results
   Accounting is generally value relevant
   Book values have greater explanatory power
   Earnings do not reflect earnings
   Earnings are not conservative
   Earnings reflect return better for new than for
    old economy companies
   Accounting is highly informative for new
    economy companies
Conclusions
 Earnings don’t incorporate and don’t reflect
  returns as expected
 Book values are more relevant reflecting
  Companies’ Law
 Concentration rather than trading seems to
  explain conservatism
 New economy governance or capitalization
  of intangibles make accounting for these
  companies more relevant
Conclusions
 Brazilian governance system makes
  earnings irrelevant
   Managers-owners don’t need external
    reporting
 Book values dominate

				
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posted:8/30/2011
language:English
pages:12