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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

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.

Suggested Citation

  • Jyrki Niskanen & Juha Kinnunen & Eero Kasanen, 1998. "A note on the information content of parent company versus consolidated earnings in Finland," European Accounting Review, Taylor & Francis Journals, vol. 7(1), pages 31-40.
    • Handle: RePEc:taf:euract:v:7:y:1998:i:1:p:31-40
    DOI: 10.1080/096381898336565
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    References listed on IDEAS

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    1. José Ramón Sánchez-Serrano & David Alaminos & Francisco García-Lagos & Angela M. Callejón-Gil, 2020. "Predicting Audit Opinion in Consolidated Financial Statements with Artificial Neural Networks," Mathematics, MDPI, vol. 8(8), pages 1-14, August.
    2. Tereza Gluzová, 2016. "Disclosure of Subsidiaries with Non-controlling Interest in Accordance with IFRS 12: Case of Materiality," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 64(1), pages 275-281.
    3. Frédéric Pourtier & Véronique Darmendrail, 2018. "La Mise En Equivalence (MEE) dans les comptes sociaux : analyse empirique du cas français et propositions normatives," Post-Print hal-01907946, HAL.
    4. 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.
    5. Goncharov, Igor & Werner, Joerg R. & Zimmermann, Jochen, 2009. "Legislative demands and economic realities: Company and group accounts compared," The International Journal of Accounting, Elsevier, vol. 44(4), pages 334-362, December.
    6. Karampinis N. & Hevas D., 2009. "The Effect of the Mandatory Application of IFRS on the Value Relevance of Accounting Data: Some Evidence from Greece," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 73-100.
    7. Hsu, Audrey Wen-hsin & Duh, Rong-Ruey & Cheng, Kang, 2012. "Does the Control-based Approach to Consolidated Statements Better Reflect Market Value than the Ownership-based Approach?," The International Journal of Accounting, Elsevier, vol. 47(2), pages 198-225.

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