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The Timeliness of Income Recognition by European Companies: An Analysis of Institutional and Market Complexity

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  • Ivana Raonic
  • Stuart McLeay
  • Ioannis Asimakopoulos

Abstract

This study examines international differences in the asymmetric timeliness of accounting earnings by modelling international exposure to different jurisdictions as a firm-specific effect, using an index of regulatory complexity that relates to conditions in each of the capital markets in which the firm's equity is listed. The companies investigated are those with shares cross-listed on European stock exchanges, some of which are also listed in New York. Variation across jurisdictions and markets with respect to earnings timeliness and conservatism can be explained in part as an interaction of market effects and regulatory effects, with some evidence of opposition between the two, and the sensitivity of earnings to stock price changes shows a common, converging trend towards greater accounting conservatism in Europe. Copyright Blackwell Publishers Ltd, 2004.

Suggested Citation

  • Ivana Raonic & Stuart McLeay & Ioannis Asimakopoulos, 2004. "The Timeliness of Income Recognition by European Companies: An Analysis of Institutional and Market Complexity," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(1-2), pages 115-148.
  • Handle: RePEc:bla:jbfnac:v:31:y:2004-01:i:1-2:p:115-148
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    Cited by:

    1. Inder K. Khurana & Changjiang Wang, 2015. "Debt Maturity Structure and Accounting Conservatism," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(1-2), pages 167-203, January.
    2. André, Paul & Filip, Andrei & Paugam, Luc, 2013. "Impact of Mandatory IFRS Adoption on Conditional Conservatism in Europe," ESSEC Working Papers WP1311, ESSEC Research Center, ESSEC Business School.
    3. Xi Li, 2015. "Accounting Conservatism and the Cost of Capital: An International Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(5-6), pages 555-582, June.
    4. Charles Piot & Alain Schatt, 2010. "La réglementation de l’audit est-elle dans l’intérêt public:quelques enseignements du modèle français," Working Papers CREGO 1100606, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    5. Akinobu Shuto & Tomomi Takada, 2010. "Managerial Ownership and Accounting Conservatism in Japan: A Test of Management Entrenchment Effect," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(7-8), pages 815-840.
    6. Sebastian Brauer & Carl-Friedrich Leuschner & Frank Westermann, 2011. "Does the Introduction of IFRS Change the Timeliness of Loss Recognition? Evidence from German Firms," Working Papers 87, Institute of Empirical Economic Research, Osnabrueck University.
    7. Juan Manuel García Lara & Beatriz García Osma & Fernando Penalva, 2009. "The Economic Determinants of Conditional Conservatism," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(3-4), pages 336-372.
    8. Van der Meulen, Sofie & Gaeremynck, Ann & Willekens, Marleen, 2007. "Attribute differences between U.S. GAAP and IFRS earnings: An exploratory study," The International Journal of Accounting, Elsevier, vol. 42(2), pages 123-142.
    9. Nikola Petrovic & Stuart Manson & Jerry Coakley, 2009. "Does Volatility Improve UK Earnings Forecasts?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(9-10), pages 1148-1179.
    10. Conover, C. Mitchell & Miller, Robert E. & Szakmary, Andrew, 2008. "The timeliness of accounting disclosures in international security markets," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 849-869, December.
    11. Firth, Michael & Rui, Oliver M. & Wu, Wenfeng, 2011. "Cooking the books: Recipes and costs of falsified financial statements in China," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 371-390, April.
    12. Gomez Biscarri, Javier & Lopez Espinosa, German, 2008. "The influence of differences in accounting standards on empirical pricing models: An application to the Fama-French model," Journal of Multinational Financial Management, Elsevier, vol. 18(4), pages 369-388, October.
    13. Christina Dargenidou & Stuart McLeay & Ivana Raonic, 2006. "Expected earnings growth and the cost of capital: an analysis of accounting regime change in the European financial market," Abacus, Accounting Foundation, University of Sydney, vol. 42(3-4), pages 388-414.
    14. Feng Chen & Kenton K. Yee & Yong Keun Yoo, 2010. "Robustness of Judicial Decisions to Valuation-Method Innovation: An Exploratory Empirical Study," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(9-10), pages 1094-1114, November/.
    15. Christos A. Grambovas & Begoña Giner & Demetris Christodoulou, 2006. "Earnings conservatism: panel data evidence from the European Union and the United States," Abacus, Accounting Foundation, University of Sydney, vol. 42(3-4), pages 354-378.
    16. Paul André & Andrei Filip & Luc Paugam, 2015. "The Effect of Mandatory IFRS Adoption on Conditional Conservatism in Europe," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(3-4), pages 482-514, April.
    17. Juan Manuel Garcia Lara & Araceli Mora, 2004. "Balance sheet versus earnings conservatism in Europe," European Accounting Review, Taylor & Francis Journals, vol. 13(2), pages 261-292.
    18. Dimitropoulos, Panagiotis E. & Asteriou, Dimitrios, 2010. "The effect of board composition on the informativeness and quality of annual earnings: Empirical evidence from Greece," Research in International Business and Finance, Elsevier, vol. 24(2), pages 190-205, June.
    19. repec:hal:journl:hal-00862683 is not listed on IDEAS
    20. repec:spr:manint:v:53:y:2013:i:4:d:10.1007_s11575-012-0152-1 is not listed on IDEAS
    21. Bushman, Robert M. & Piotroski, Joseph D., 2006. "Financial reporting incentives for conservative accounting: The influence of legal and political institutions," Journal of Accounting and Economics, Elsevier, vol. 42(1-2), pages 107-148, October.
    22. Juan Manuel García Lara & Beatriz García Osma & Belén Gill de Albornoz Noguer, 2006. "Effects of database choice on international accounting research," Abacus, Accounting Foundation, University of Sydney, vol. 42(3-4), pages 426-454.

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