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A note on the information content of parent company versus consolidated earnings in Finland

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  • Jyrki Niskanen
  • Juha Kinnunen
  • Eero Kasanen
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    Abstract

    Little empirical research has been focused on analysing the information content of consolidated versus parent-only earnings numbers. In most European countries corporate annual reports include parent company statements, whereas in the USA only consolidated financial statements are available to shareholders. Using accounting and market data from thirty-five Finnish listed firms, we examine the information content of consolidated versus parent-only earnings, after controlling for each other. The results show that consolidated earnings are a significant incremental explanatory variable for stock returns, while parent-only earnings are not. The findings suggest that consolidation improves the information content of earnings, and the requirement to disclose parent-only earnings should be based on arguments other than their value-relevance to shareholders.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/096381898336565
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal European Accounting Review.

    Volume (Year): 7 (1998)
    Issue (Month): 1 ()
    Pages: 31-40

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    Handle: RePEc:taf:euract:v:7:y:1998:i:1:p:31-40

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    1. Kane, Alex & Lee, Young Ki & Marcus, Alan, 1984. " Earnings and Dividend Announcements: Is There a Corroboration Effect?," Journal of Finance, American Finance Association, vol. 39(4), pages 1091-99, September.
    2. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    3. Beaver, William H. & Griffin, Paul A. & Landsman, Wayne R., 1982. "The incremental information content of replacement cost earnings," Journal of Accounting and Economics, Elsevier, vol. 4(1), pages 15-39, July.
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    Cited by:
    1. Pascal Dumontier & Bernard Raffournier, 2002. "Accounting and capital markets: a survey of the European evidence," European Accounting Review, Taylor & Francis Journals, vol. 11(1), pages 119-151.

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