Scale Effects in Capital Markets‐Based Accounting Research

By Mary E. Barth, Greg Clinch. 2009

455 citations recorded by the source corpus.

Based on data simulated using a modified Ohlson (1995) valuation model, we investigate effects on inferences of five potential scale-related effects: multiplicative and additive omitted scale factors, scale-varying coefficients, survivorship, and heteroscedasticity. We find that diagnostics identified in prior research are not successful in detecting or distinguishing these scale effects. Thus, we investigate the effectiveness at mitigating scale effects of six specifications of regressions of equity market value on equity book value and earnings: undeflated, share-deflated, equity book value-deflated, lagged price-deflated, returns, and equity market value-deflated. For each specification, we compare frequency of correct rejection that the coefficients equal zero, coefficient bias and absolute error, and regression explanatory power. We find that share-deflated and undeflated specifications generally perform the best, regardless of the type of scale effect. Copyright (c) 2009 The Authors Journal compilation (c) 2009 Blackwell Publishing Ltd.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/0bdb60076153fcf229d91b5dfb291c887568ea4c

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Citations in the corpus

Capital Markets Research in Accounting (2001, background): “(i) bias in test statistics because of cross-correlation in the data or regression residuals (see Schipper and Thompson, 1983; Collins and Dent, 1984; Sefcik and Thompson, 1986; Bernard, 1987; Christie, 1987; Kothari and Wasley, 1989; Brav, 2000; Mitchell and Stafford, 2000); (ii) price and return r”
The influence of corporate social responsibility disclosure on share prices: Evidence from the United Kingdom (2015, methodology): “An analysis using the above equation is based on the association between share price/ market value of equity, book value and earnings (Barth and Clinch, 2009).”
Does ESG Performance Enhance Firm Value? Evidence from Korea (2018, methodology): “Barth, M.E.; Clinch, G. Scale effects in capital markets-based accounting research.”
The Impact of IFRS Adoption on the Value Relevance of Book Value and Earnings (2011, unknown): “(1996), Easton (1998), and Barth and Clinch (2009) study the question of deflation and adjustments for heteroscedasticity.”
The Value Relevance of Environmental, Social, and Governance Performance: The Brazilian Case (2018, methodology): “As we indicated in the methodology section, we initially present the results obtained by applying the modified version of Ohlson’s [39] model proposed by Barth and Clinch [40] without including the CSR information and we later include in the model the different ESG performance measures described abo”
The Reliability of Fair Value versus Historical Cost Information: Evidence from Closed-End Mutual Funds (2003, background): “Variables are stated on a per-share basis to mitigate the effects of scale across sample firms (Barth and Clinch [2001]).”
Relevance of Differences Between Net Income Based on IFRS and Domestic Standards for European Firms (2012, unknown): “We first estimate equation (1), which includes the aggregate net income adjustment: (1) PRICE is based on share price four months after 2004 fiscal year-end because the accounting amounts in equation (1) relate to 2004.5 All amounts are stated on a per share basis (Barth and Clinch 2009).”
The valuation relevance of environmental performance revisited: The moderating role of environmental provisions (2017, unknown): “According to Barth and Clinch (2009), the above model on a per-share basis produces more consistent and less biased estimations of coefficients’ p-values3: 3 All the variables, their definitions, and the sources from which the data are extracted are presented in Appendix A.”