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A Valuation Based Analysis of the Spanish Accounting Reforms

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  • Begoña Giner
  • William Rees

Abstract

This paper contrasts the association between security prices and accounting information before and after the Spanish accounting reforms. Spanish regulations were changed during 1989 and 1990 so as to conform with EU requirements, bringing them broadly into line with international standards, although the new system still focuses on compliance with rules rather than reflecting the substance of economic transactions. We model security price as a function of two fundamental accounting variables -- book value of equity per share and earnings per share. The model is estimated using a sample drawn from non-financial companies listed on the Madrid Stock Exchange during the period 1986--1995. Whilst the results demonstrate only a modest improvement in value relevance of accounting information following the reform, they show that the influence of the earnings variable becomes somewhat smaller whilst that on equity is increased. This is consistent with earnings containing a larger proportion of transitory elements following the reform, whilst the equity value appears to have more economic relevance than previously. Copyright Kluwer Academic Publishers 1999

Suggested Citation

  • Begoña Giner & William Rees, 1999. "A Valuation Based Analysis of the Spanish Accounting Reforms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 3(1), pages 31-48, March.
    • Handle: RePEc:kap:jmgtgv:v:3:y:1999:i:1:p:31-48
    DOI: 10.1023/A:1009968532672
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    References listed on IDEAS

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    1. Basu, Sudipta, 1997. "The conservatism principle and the asymmetric timeliness of earnings," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 3-37, December.
    2. Harris, Ts & Lang, M & Moller, Hp, 1994. "The Value Relevance Of German Accounting Measures - An Empirical-Analysis," Journal of Accounting Research, Wiley Blackwell, vol. 32(2), pages 187-209.
    3. Lev, B, 1989. "On The Usefulness Of Earnings And Earnings Research - Lessons And Directions From 2 Decades Of Empirical-Research," Journal of Accounting Research, Wiley Blackwell, vol. 27, pages 153-192.
    4. Lev, B & Thiagarajan, Sr, 1993. "Fundamental Information Analysis," Journal of Accounting Research, Wiley Blackwell, vol. 31(2), pages 190-215.
    5. Collins, Daniel W. & Maydew, Edward L. & Weiss, Ira S., 1997. "Changes in the value-relevance of earnings and book values over the past forty years," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 39-67, December.
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    Cited by:

    1. Begona Giner & Carmelo Reverte, 2001. "Valuation implications of capital structure: a contextual approach," European Accounting Review, Taylor & Francis Journals, vol. 10(2), pages 291-314.
    2. Kathryn E. Easterday & Pradyot K. Sen, 2023. "Another look at the dividend-price relationship in the accounting valuation framework," Review of Quantitative Finance and Accounting, Springer, vol. 61(3), pages 879-925, October.
    3. Kimouche Bilal, 2021. "Accounting Reforms And Accounting Quality: Evidence From Algeria," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 27, pages 33-53, June.
    4. Peter Kajüter & Martin Nienhaus, 2017. "The Impact of IFRS 8 Adoption on the Usefulness of Segment Reports," Abacus, Accounting Foundation, University of Sydney, vol. 53(1), pages 28-58, March.
    5. Andros Gregoriou, 2010. "Corporate Valuation and Dividends: UK Evidence from Panel Unit Root and Cointegration Tests," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(1), pages 15-22, March.
    6. Lorena Mitrione & George Tanewski & Jacqueline Birt, 2014. "The relevance to firm valuation of research and development expenditure in the Australian health-care industry," Australian Journal of Management, Australian School of Business, vol. 39(3), pages 425-452, August.
    7. Patrik Bauer & Vít Bubák, 2003. "Informative value of firm capital structure," Prague Economic Papers, Prague University of Economics and Business, vol. 2003(3), pages 233-248.
    8. Begona Giner & Carmelo Reverte, 1999. "The value relevance of earnings disaggregation provided in the Spanish profit and loss account," European Accounting Review, Taylor & Francis Journals, vol. 8(4), pages 609-629.
    9. Saeed Akbar & Andrew W. Stark, 2003. "Deflators, Net Shareholder Cash Flows, Dividends, Capital Contributions and Estimated Models of Corporate Valuation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(9‐10), pages 1211-1233, December.
    10. Igor Goncharov & Allan Hodgson & Suntharee Lhaopadchan & Sonia Sanabria, 2013. "Asymmetric trading by insiders – comparing abnormal returns and earnings prediction in Spain and Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(1), pages 163-184, March.
    11. William Rees, 2005. "Discussion of The Pricing of Dividends in Equity Valuation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(3‐4), pages 471-485, April.
    12. John R. M. Hand & Wayne R. Landsman, 2005. "The Pricing of Dividends in Equity Valuation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(3‐4), pages 435-469, April.

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