Clicca qui per scaricare

Assessing value relevance of comprehensive income in European banks and other financial institutions
Titolo Rivista: FINANCIAL REPORTING 
Autori/Curatori: Alessandro Mechelli, Riccardo Cimini 
Anno di pubblicazione:  2013 Fascicolo: Lingua: Italiano 
Numero pagine:  29 P. 13-41 Dimensione file:  772 KB
DOI:  10.3280/FR2013-001003
Il DOI è il codice a barre della proprietà intellettuale: per saperne di più:  clicca qui   qui 


The IAS/IFRS compliant groups have been disclosing comprehensive income since 2009, when the IAS 1-revised became effective. This paper aims to investigate the value relevance of comprehensive income and its components in European banks and other financial institutions. The research has been developed by having a sample of 166 European listed groups whose data have been collected in the 2009, 2010 and 2011 (498 firm-year observations) consolidated financial statements. In contrast to previous findings, related to all the sectors, our research highlights a higher value relevance of comprehensive income in respect to net income. Moving to the single OCI components, our results suggest that gains and losses on remeasuring available-for-sale financial assets (AFSit) are value relevant in European banks and other financial institutions.


Keywords: Comprehensive income; net income; value relevance; IAS 1-revised; European listed groups

  1. Eccher E., Ramesh K. and Thiagarajan R. (1996), Fair value disclosures by BHCs, Journal of Accounting and Economics, 22(1-3), pp. 79-117,, 10.1016/S0165-4101(96)00438-7DOI: 10.1016/S0165-4101(96)00438-7
  2. Bae K.H. and Jeong S.W. (2007), The value-relevance of Earnings and Book Value, Ownership Structure, and Business Group Affiliation: Evidence From Korean Business Groups, Journal of Business Finance & Accounting, 34(5-6), pp. 740-766,, 10.1111/j.1468-5957.2007.02017.xDOI: 10.1111/j.1468-5957.2007.02017.x
  3. Bao B.H. and Chow L. (1999), The Usefulness of Earnings and Book Value for Equity Valuation in Emerging Capital Markets: Evidence From Listed Companies in the People’s Republic of China, Journal of International Financial Management & Accounting, 10(2), pp. 85-104,, 10.1111/1467-646X.00045DOI: 10.1111/1467-646X.00045
  4. Barth M.E., Beaver W.H. and Landsman W.R. (1996), Value-Relevance of Banks’ Fair Value Disclosures under SFAS No. 107, The Accounting Review, 71(4), pp. 513-537.
  5. Barth M.E., Beaver W.H. and Landsman W.R. (2001), The relevance of the valuerelevance literature for financial accounting standard setting: another view, Journal of Accounting and Economics, 31(1-3), pp. 77-104,, 10.1016/S0165-4101(01)00019-2DOI: 10.1016/S0165-4101(01)00019-2
  6. Barth M.E., Landsman W.R. and Lang M.H. (2008), International Accounting Standards and Accounting Quality, Journal of Accounting Research, 46(3), pp. 467-498,, 10.1111/j.1475-679X.2008.00287.xDOI: 10.1111/j.1475-679X.2008.00287.x
  7. Biddle G. and Choi J.H. (2006), Is comprehensive income useful?, Journal of Contemporary Accounting & Economics, 2(1), pp. 1-32,, 10.1016/S1815-5669(10)70015-1DOI: 10.1016/S1815-5669(10)70015-1
  8. Brief R.P. and Peasnell K.V. (1996), Clean surplus: A link between accounting and finance. (New York: Garland Publishing).
  9. Brown S., Lo K. and Lys T. (1999), Use of R2 in accounting research: measuring changes in value relevance over the last four decades, Journal of Accounting and Economics, 28(2), pp. 83-115,, 10.1016/S0165-4101(99)00023-3DOI: 10.1016/S0165-4101(99)00023-3
  10. Cahan S.F., Courtnay S.M., Gronewoller P.L. and Upton D.R. (2000), Value relevance of Mandated Comprehensive Income Disclosures, Journal of Business Finance & Accounting, 27(9-10), pp. 1273-1309.
  11. Chambers D., Linsmeier T.J., Shakespeare C. and Sougiannis T. (2007), An Evaluation of SFAS No 130 comprehensive Income disclosures, Review of Accounting Studies, 12(4), pp. 557-593,, 10.1007/s11142-007-9043-2DOI: 10.1007/s11142-007-9043-2
  12. Chan K. and Seow G. (1996), The Association between Stock Returns and Foreign GAAP Earnings Versus Earnings Adjusted to U.S. GAAP, Journal of Accounting and Economics, 21, pp. 139-158,, 10.1016/0165-4101(95)00405-XDOI: 10.1016/0165-4101(95)00405-X
  13. Cheng C.S., Cheung J.K. and Gopalakrishnan V. (1993), On the usefulness of operating income, net income and comprehensive income in explaining security returns, Accounting and Business Research, 23(91), pp. 195-203,, 10.1080/00014788.1993.9729879DOI: 10.1080/00014788.1993.9729879
  14. Cramer J.S. (1987), Mean and Variance of R2 in Small and Moderate Samples, Journal of Econometrics, 35, pp. 253-266,, 10.1016/0304-4076(87)90027-3DOI: 10.1016/0304-4076(87)90027-3
  15. Davidson R. and MacKinnon J.G. (1981), Several tests for Model Specification in the Presence of Alternative Hypotheses, Econometrica, 49(3), pp. 781-793,, 10.2307/1911522DOI: 10.2307/1911522
  16. Devalle A., Onali E. and Magarini R. (2010), Assessing the value relevance of accounting data after the introduction of IFRS in Europe, Journal of International Financial Management and Accounting, 21(2), pp. 85-119.
  17. Dhaliwal D., Subramanyam K.R. and Trezevant R. (1999), Is comprehensive income superior to net income as a measure of firm performance, Journal of Accounting and Economics, 26(1-3), pp. 43-67,, 10.1016/S0165-4101(98)00033-0DOI: 10.1016/S0165-4101(98)00033-0
  18. Easton P.D. and Harris T.S. (1991), Earnings as an Explanatory Variable for Returns, Journal of Accounting Research, 29(1), pp. 19-36,, 10.2307/2491026DOI: 10.2307/2491026
  19. Goncharov I. and Hodgson A. (2011), Measuring and Reporting Income in Europe, Journal of Accounting Research, 10(1), pp. 27-59.
  20. Greene W.H. (2008), Econometric Analysis. 6th Edition. (Edinburgh: Pearson Prentice Hall).
  21. Hayn C.H. (1995), The information content of losses, Journal of Accounting and Economics, 20(2), pp. 125-153,, 10.1016/0165-4101(95)00397-2DOI: 10.1016/0165-4101(95)00397-2
  22. Hirst D.E. and Hopkins P.E. (1998), Comprehensive Income Reporting and Analysts valuation Judgments, Journal of Accounting Research, 36(Supplement), pp. 47-75,, 10.2307/2491306DOI: 10.2307/2491306
  23. Hung M. and Subramanyam K.R. (2007), Financial statement effect of adopting international accounting standards: the case of Germany, Review of Accounting Studies, 12(4), pp. 623-657,, 10.1007/s11142-007-9049-9DOI: 10.1007/s11142-007-9049-9
  24. Jones D.A. and Smith K.J. (2011), Comparing the Value Relevance, Predictive Value, and Persistence of Other Comprehensive Income and Special Items, The Accounting Review, 86(6), pp. 2047-2073,, 10.2308/accr-10133DOI: 10.2308/accr-10133
  25. Kanagaretnam K., Mathieu R. and Shehata M. (2009), Usefulness of comprehensive income reporting in Canada, Journal of Accounting and Public Policy, 28(4), pp. 349-365,, 10.1016/j.jaccpubpol.2009.06.004DOI: 10.1016/j.jaccpubpol.2009.06.004
  26. Khurana I.K. and Kim M. (2003), Relative value relevance of historical cost vs. fair value: Evidence from bank holding companies, Journal of Accounting and Public Policy, 22, pp. 19-42,, 10.1016/S0278-4254(02)00084-4DOI: 10.1016/S0278-4254(02)00084-4
  27. Kothari S.P. and Zimmerman J.L. (1995), Price and return model, Journal of Accounting and Economics, 20(2), pp. 155-192,, 10.1016/0165-4101(95)00399-4DOI: 10.1016/0165-4101(95)00399-4
  28. Lee Y.J., Petroni K.R. and Shen M. (2006), Cherry Picking, Disclosure Quality, and Comprehensive Income Reporting Choises: The Case of Property-Liability Insurers, Contemporary Accounting Research, 23(3), pp. 655-692,, 10.1506/5QB8-PBQY-Y86L-DRYLDOI: 10.1506/5QB8-PBQY-Y86L-DRYL
  29. Louis H. (2003), The Value relevance of the Foreign Translation Adjustment, The Accounting Review, 78(4), pp. 1027-1047,, 10.2308/accr.2003.78.4.1027DOI: 10.2308/accr.2003.78.4.1027
  30. Maines L.A. and McDaniel L.S. (2000), Effects of Comprehensive-Income Characteristics on Nonprofessional Investors’ judgements: The Role of Financial-Statement Presentation Format, The Accounting Review, 75(2), pp. 179-207,, 10.2308/accr.2000.75.2.179DOI: 10.2308/accr.2000.75.2.179
  31. Mechelli A. (2012), The Value Relevance of Comprehensive Income and its Components in European Weak Equity Countries, Accepted to the 35° EAA Annual Congress. (Ljubljana, 9-12th May 2012).
  32. Mitra S. and Hossain M. (2009), Value-relevance of pension transition adjustments and other comprehensive income components in the adoption year of SFAS N.
  33. 158, Review of Quantitative Finance And Accounting, 33(3), pp. 279-301,, 10.1007/s11156-009-0112-4DOI: 10.1007/s11156-009-0112-4
  34. Mizon G.E. (1984), The Encompassing Approach in Econometrics, in Wallis K.F. and Hendry D.F. (Eds), Quantitative Economics and Econometrics Analysis. (Oxford: Basil Blackwell), pp. 135-172,, 10.2307/1911313DOI: 10.2307/1911313
  35. Mizon G.E. and Richard J.F. (1986), The Encompassing Principle and its Application to Testing Non-Nested Hypotheses, Econometrica, 54, pp. 657-678.
  36. O’Hanlon J.F. and Pope P.F. (1999), The value-relevance of UK dirty surplus accounting flows, British Accounting Review, 31(4), pp. 459-482,, 10.1006/bare.1999.0116DOI: 10.1006/bare.1999.0116
  37. Ohlson J.A. (1995), Earnings, book values, and dividends in equity valuation, Contemporary Accounting Research, 11(2), pp. 661-688,, 10.1111/j.1911-3846.1995.tb00461.xDOI: 10.1111/j.1911-3846.1995.tb00461.x
  38. Park M., Park T. and Ro B. (1999), Fair value disclosures for investment securities and bank equity: evidence from SFAS No. 115, Journal of Accounting, Auditing, and Finance, 14(3), pp. 347-370.
  39. Petersen M. (2009), Estimating standard errors in finance panel data sets: Comparing approaches, Review of Financial Studies, 22(1), pp. 435-480,, 10.1093/rfs/hhn053DOI: 10.1093/rfs/hhn053
  40. Pinto J.A. (2005), How Comprehensive is Comprehensive Income? The Value relevance of Foreign Currency Translation Adjustments, Journal of International Financial Management and Accounting, 16(2), pp. 97-122,, 10.1111/j.1467-646X.2005.00113.xDOI: 10.1111/j.1467-646X.2005.00113.x
  41. Van Cauwenberge P. and De Beelde I. (2010), On the IASB Comprehensive Income Project: An Analysis of the Case for Dual Income Display, Abacus, 43(1), pp. 1-26,, 10.1111/j.1467-6281.2007.00215.xDOI: 10.1111/j.1467-6281.2007.00215.x
  42. Verbeek M. (2006), Econometria. (Bologna: Zanichelli). Vuong Q. (1989), Likelihood ratio tests for model selection and non-nested hypothesis, Econometrica, 57(2), pp. 307-333,, 10.2307/1912557.WhiteH.(1984),AHeteroskedasticity-ConsistentCovarianceMatrixEstimatorandaDirectTestofHeteroskedasticity,Econometrica,48(4),pp.817-838,doi:10.2307/1912934DOI: 10.2307/1912557.WhiteH.(1984),AHeteroskedasticity-ConsistentCovarianceMatrixEstimatorandaDirectTestofHeteroskedasticity,Econometrica,48(4),pp.817-838,doi:10.2307/1912934
  43. Wilcoxon R. (1945), Individual comparisons by ranking methods, Biometrics, 1(6), pp. 80-83,, 10.2307/3001968DOI: 10.2307/3001968
  44. Yang Z., Rohrbach K. and Chen S. (2005), The Impact of Standard Setting on Relevance and Reliability of Accounting Information: Lower of Cost or Market Accounting Reforms in China, Journal of International Financial Management and Accounting, 16(3), pp. 194-228,, 10.1111/j.1467-646X.2005.00117.xDOI: 10.1111/j.1467-646X.2005.00117.x



  1. Alessandro Mechelli, Vincenzo Sforza, Alessandra Stefanoni, Riccardo Cimini, The value relevance of the fair value hierarchy. Empirical evidence from the European Union in FINANCIAL REPORTING 2/2018 pp. 7, DOI: 10.3280/FR2018-002002
  2. Alessandro Mechelli, Riccardo Cimini, The value relevance of earnings and book value across the EU. A comparative Analysis in FINANCIAL REPORTING 2/2015 pp. 83, DOI: 10.3280/FR2014-002004
  3. Riccardo Cimini, Alessandro Gaetano, Alessandra Pagani, The relation between R&D accounting treatment and the risk of the firm: Evidence from the Italian market in FINANCIAL REPORTING 1/2014 pp. 33, DOI: 10.3280/FR2014-001002

Alessandro Mechelli, Riccardo Cimini, in "FINANCIAL REPORTING" 1/2013, pp. 13-41, DOI:10.3280/FR2013-001003

   

FrancoAngeli è membro della Publishers International Linking Association associazione indipendente e no profit per facilitare l'accesso degli studiosi ai contenuti digitali nelle pubblicazioni professionali e scientifiche