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Do alternative methods of reporting non-controlling interests really matter?

Author

Listed:
  • Ana I Lopes

    (Department of Accounting, ISCTE-IUL Business School, Lisbon University Institute (ISCTE-IUL), Portugal)

  • Isabel Lourenço

    (UNIDE, Department of Accounting, ISCTE-IUL Business School, Lisbon University Institute (ISCTE-IUL), Portugal)

  • Mark Soliman

    (University of Southern California, USA)

Abstract

Researchers have long been interested in whether the classification of various items on the balance sheet matters to investors. This paper provides evidence on whether reporting non-controlling interests (NCI) as equity or as non-equity matters in terms of value relevance. We use a sample of German firms that voluntary adopted International Financial Reporting Standards early. This adoption required them to change their reporting of NCI from the non-equity to the equity portion of the balance sheet. After conducting sensitivity tests for self-selection bias and controlling for weight of NCI, firm size and leverage, our results suggest that NCI are priced by the market in the same manner irrespectively of being reported as equity or non-equity. This finding reinforces the notion that equity markets are efficient in their processing of information, regardless of the classification by standard setters. JEL Classification: M41-Accounting.

Suggested Citation

  • Ana I Lopes & Isabel Lourenço & Mark Soliman, 2013. "Do alternative methods of reporting non-controlling interests really matter?," Australian Journal of Management, Australian School of Business, vol. 38(1), pages 7-30, April.
    • Handle: RePEc:sae:ausman:v:38:y:2013:i:1:p:7-30
    DOI: 10.1177/0312896212458788
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    2. Kelvin Jui Keng Tan & Jia Min Lee & Robert W. Faff & Kathy Walsh, 2016. "Short-selling pressure and last-resort debt finance: evidence from 144A high-yield risk-adjusted debt," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(4), pages 1149-1185, December.
    3. Millicent Chang & Andrew B. Jackson & Marvin Wee, 2018. "A review of research on regulation changes in the Asia‐Pacific region," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(3), pages 635-667, September.

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    More about this item

    Keywords

    Changes to standards; consolidated statement of financial position; non-controlling interests; recognition versus disclosure;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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