List of Illustrations x Acknowledgements xiii Foreword xv Prologue xix xii List of Illustrations A2.6.2 Market capitalization: Santander and BBVA A2.6.3 Global synergies A2.8.1 New Logico organizational structure A2.8.2 Global TGFM organizational structure A2.8.3 TGFM Europe organizational structure A2.8.4 Scope of customer information systems within TGFM A2.8.5 Market (IATA) rankings for Logico FM in Europe A2.8.6a Early attempts to measure productivity of the SFA A2.8.6b Early benefits framework A2.8.6c Early productivity results A2.8.7 SFA project team organization chart A2.
This chapter studies the impact of financial reporting quality on firms' market performance in a sample of LATAM corporations. We infer that, especially in contexts of high information asymmetry, investors are not able to effectively discern the quality of the information they are provided with and can therefore be misled in their investment decisions by managerial opportunism. Our theoretical framework is built upon a combined agency theory and cognitive approach. We thereby seek to provide a valuable method to better understand how investors could be making suboptimal choices as a consequence of managers' opportunistic behaviour. Empirically, we use the Generalized Method of Moments (GMM) model, hypothesizing that a positive relationship should be observed between the opportunistic manipulation of earnings (that is, the misuse of accounting accruals) and the firm's market performance (that is, the consequential behaviour of investors). Through this 'pioneering' methodology, applied to the relatively under-researched LATAM region, we find that: (1) Financial data are identifiably and consistently manipulated through discretionary accruals in these countries. (2) As manipulation increases, markets do tend to appear more attractive to investors. (3) The elasticity of the market reaction to this manipulation is higher in what we term 'opaque' countries.
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