Title page for ETD etd-06032014-123906

Type of Document Dissertation
Author Rosa, Regina Cavalier
Author's Email Address grosa1@tigers.lsu.edu
URN etd-06032014-123906
Title Has the FASB and IASB's Shift toward an Asset/Liability View Enhanced the Predictive Usefulness of ROE?
Degree Doctor of Philosophy (Ph.D.)
Department Accounting
Advisory Committee
Advisor Name Title
Tiras, Samuel Committee Chair
Cheng, Christine Committee Member
Liu, Carol Committee Member
Watson, Edward Dean's Representative
  • predictive usefulness
  • international reporting
  • reporting quality
  • asset/liability view
Date of Defense 2014-05-07
Availability unrestricted
Over the past several decades, accounting standard setters have been gradually shifting financial reporting toward an asset/liability view, by rewriting the underlying conceptual framework and issuing accounting standards that reflect this view. The asset/liability view enhances comparability of a firmís investment base to that of its peers, and thus enhances the comparability of a firmís return of equity (ROE). This, in turn, increases the transparency with which firm-specific performance differs from its peers. Greater transparency would be expected to improve predictive usefulness, but would also place greater pressure on a firm to meet the performance of its peers. In the US, I find that predictive usefulness has generally increased with the shift, indicating that rather than resulting in greater earnings management designed to mask firm-specific differences, the shift resulted in greater transparency of firm-specific accounting information. I also find predictive usefulness has increased in countries that have adopted IFRS, indicating that a further shift toward an asset/liability view to include the greater use of fair values common in IFRS further increased transparency of firm-specific accounting information in adopting countries. This suggests that expanding the use of fair values and/or adopting IFRS in the US may also result in greater reporting transparency. But as the predictive usefulness increases, I find that analysts in the US are not increasing their reliance on firm-specific accounting information, suggesting analysts remain skeptical, even though analysts would likely increase the efficiency in which they form their forecasts by relying more on accounting information.
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