Results suggest a decline in the value relevance of Thai book values and earnings following the devaluation. Prior to mid-1997, the Bank of Thailand pegged the value of the baht to a basket of currencies of which 80 percent were weighted to the U.S. dollar. The devaluation was followed by volatile exchange rates. The change in value relevance of accounting information after the devaluation may be attributable to the initial recognition of foreign exchange losses and the subsequent recognition of foreign exchange gains as exchange rates fell and then recovered. Based on previous research and economic theory it is hypothesized that, because of differences in legal systems and the demand for accounting information, differences in legal protection for external shareholders, and difference in the degree of tax conformity in the sample countries, accounting earnings in the U.K. and the U.S. will be more closely related to underlying economic activity than will accounting earnings in France and Germany.
Empirical results are generally consistent with the hypothesis.
Suppose that the countries are not sure how much the firm values the sites that they offer to it. Also suppose that the countries fashion their expectation of site value by assigning the same likelihood to each value that they deem possible. Then, if they are quite unsure about site values, they will offer small subsidies to the firm. If they are pretty sure about site values, they will offer large subsidies. This paper examines competing proprietary and political cost arguments for incentives facing managers of different types of Australian and U.K. pension fund, to voluntarily disclose pension liability information in annual reports sent to their participants.