We suggest that accounting homogeneity is a necessary step in the process of financial market integration. Specifically, we analyze the effect of integration in the “accounting sense” in the correct analysis of international investments and fund allocation by estimating several pricing and valuation models in a cross-country context. We design our analysis in such a way that we can control for differences in accounting standards of the firms contained in the sample. Our results show that the accounting dimension is relevant for cross-country pricing and valuation: the use of homogeneous accounting leads to higher goodness-of-fit of international versions of the models, at levels similar to those of domestic versions and superior to those of non-homogeneous versions. Our results imply that accounting integration is an additional, and important, dimension of financial integration and that progress towards further accounting homogeneity would lead to more accurate pricing of international assets and to an improvement of the efficiency of international fund allocation.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number
03/08.
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Other versions of this item:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: