In recent years, several accounting standards, including IFRS 3, issued by the IASB, substitute historical cost with fair value measures and so provide managers with increased discretion to determine fair value without an actual market for the asset. Using Swedish data, we document the accounting consequences of the adoption of IFRS 3 and the stock market's reaction. After the adoption of this standard in January 2005 the amount of capitalized goodwill increased substantially. Goodwill impairments under IFRS are considerably lower than goodwill amortizations and impairments made under Swedish GAAP. Consequently, the adoption of IFRS 3 increased reported earnings. An analysis of economic incentives influencing the impairment decision at the initial adoption of IFRS 3 shows that tenured management is negatively associated with the impairment decision. However, most firms did not reclassify goodwill or make additional impairments. Firms with substantial amounts of goodwill yielded abnormally high returns despite abnormally low earnings. Investors seem to, correctly or incorrectly, have viewed the accrual-based increase in earnings stemming from IFRS 3 as an indication of higher future cash flows.
Purpose
Accentuating the concept of management under uncertainty in the Uppsala internationalization process model, the purpose of this paper is to develop a model for describing how managers act while keeping uncertainty at an acceptable level.
Design/methodology/approach
The authors perform two empirical studies to underpin the model they construct. First, a survey of 309 chief executive officers and chief financial officers in large, publicly listed international firms in the Nordic region on managerial risk perceptions and, second, a case study of Volvo Car Corporation and its endeavors when developing new car models for the Chinese market on a new platform – a process characterized by unprecedented uncertainty.
Findings
The proposed model describing managers’ behavior under uncertainty contains elements such as adjusting/proceeding in small steps, reducing uncertainty via learning, building relationships with important parties in the environment to avoid unforeseen changes and re-dos (i.e. starting all over again) and, perhaps most important, acting despite uncertainty.
Originality/value
The paper highlights a central, though forgotten, concept of the Uppsala internationalization process model, i.e. management under uncertainty, and, thereby, opens a new path for research on how manager behave under the sway of uncertainty.
Purpose -The purpose of this paper is to investigate the extent to which founding-family firms create value. In particular, the paper investigates how agency costs and monitoring capabilities influence the value creation process. Design/methodology/approach -The empirical analysis relies on unique hand-collected ownership data that has been collected for all Swedish publicly listed firms in the years 2001 to 2010 (2,128 observations). The research design employs level regression specifications and they are tested using pooled cross-sectional regressions with controls for year and industry fixed effects. Findings -The paper confirms previous studies that firms with founding family ownership have a higher value (Tobin's Q) and higher performance (RNOA). In contrast to prior studies, the paper finds that firm value and performance is significantly higher when ownership is concentrated the most. The paper also shows that firm value and performance is significantly lower for long-term non-founding-family ownership. Originality/value -This is one of the largest single-country analyses of founding family owner effects on value and performance in publicly listed firms. The paper confirms known associations between ownership and performance in a unique institutional setting. The paper extends previous research findings by identifying differences in value and performance between founding family owners and long-term non-founding-family owners.
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