corporate social responsibility, corporate performance, shareholder value, value-based management,

We advance a theory asserting that CSR performance may exacerbate, not necessarily moderate, a company's negative stock-price response to negative events. In testing this theory, we hypothesize and find that CSR performance alleviates (magnifies) the immediate negative stock-price response to inadvertent (fraudulent) restatement announcements, and that these findings are robust to specifications that consider alternative CSR measures and a multitude of control variables shown by prior research to have explanatory power for the cross sectional variation in stock returns. Overall, using restatement announcements as a channel through which CSR performance may affect company value, we show, in contrast to prior research, that depending on management conduct leading to the restatement, a company's CSR performance may destroy, not necessarily enhance, firm value. Our findings may, thus, inform researchers, market participants, and regulators.

We decompose broad-based measures of accruals into firm-specific and related-firm components. We find that the negative relation between accruals and future firm performance is almost entirely attributable to the firm-specific component. Standard risk-based explanations are hard to reconcile with this fact. To the extent expected returns have a common component spanning related firms, a risk-based explanation would suggest a stronger negative relation between accruals and future firm performance when related firms are also growing. Instead, the attenuation we document is more likely attributable to suboptimal investment decisions, which the stock market and analysts do not incorporate in a timely manner. AbstractWe decompose broad based measures of accruals into firm specific and related firm components. We find that the negative relation between accruals and future firm performance is almost entirely attributable to the firm specific component. Standard risk based explanations are hard to reconcile with this fact. To the extent expected returns have a common component spanning related firms, a risk based explanation would suggest a stronger negative relation between accruals and future firm performance when related firms are also growing. Instead, the attenuation we document is more likely attributable to sub-optimal investment decisions, which the stock market and analysts do not incorporate in a timely manner.JEL classification: G12; G14; M41

Information on the link between market performance and corporate social responsibility (CSR) activities provides an indication of the extent of acceptance by investors of these types of activities. The nature of this relationship is of critical importance for management trying to reconcile the demands of the company's shareholders with those of a much wider group of stakeholders and for investors pursuing a socially responsible investing strategy. Using an international database we investigate the extent to which expenditures on CSR activities are valued across market in six countries/regions. We find that CSR activities are highly valued by the investors in the European markets, where our findings clearly indicate that such activities lead to higher market valuations. In the US, Japan and Australia expenditures on CSR activities have a neutral impact on company valuation, which is still a good outcome for management who wish to incorporate into their decision process the objectives of a wide spectrum of stakeholders and for investors wishing to tilt their investments towards the more socially responsible companies.

The scope of this is paper is to provide new empirical evidence on the value relevance of employee stock options (ESOs) in Europe. We show, empirically, that the market participants when pricing a firm's equity place approximately the same valuation weights on the ESOdeferred compensation expense (the so called ''ESO asset'') and the compensation option liability (the so called ''ESO liability''). Our empirical findings support the theoretical work of Ohlson and Penman who suggest that the deferred compensation expense be treated as a contra-liability. The second contribution of our work rests on the nature of the ESO expense. We show that the distinction between persistent and non-persistent ESO expenses is of critical importance for the market participants. Accordingly, an improved accounting disclosure should assist the investors in assessing the long-term goals of the ESO plans at the firm level.

The paper analyses whether the adoption of the IAS regime implies an improvement of the firms' earnings quality. Referring to a sample of German listed companies reporting under the IAS and German GAAP (HGB) in 2000-2004 years, we first examine whether IAS adopters are less subject to earnings management. Our findings show that, in general, the IAS subsample exhibits a level of earnings management lower or equal to the HGB adopters. The general evidence supports the position of the International Accounting Standard Board and of that part of the academic literature stating the IAS's better quality. Secondly, we investigate whether investors perceive a lower level of uncertainty and information asymmetry for earnings under the IAS regime, after controlling for the level of the discretionary accruals. We find that the IAS adoption entails a lower information asymmetry, but this benefit decreases with the firm size. This means that investors perceive the benefits of higher-quality accounting standards as partially offset by a greater managerial discretion in the small and medium size firms. Therefore, the improvement of the enforcement mechanisms (in addition to the Standard's quality) should be a major concern for IASB and other regulators.

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