What is the Best Measure of Financial Performance? Comprehensive Income versus Net Income: Evidence from Turkey

Demir, Volkan; Bahadir, Oguzhan; Öncel, Aslı Gül

doi:10.3848/iif.2013.323.3351

Cited by 4 publications

(7 citation statements)

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“…Such studies compare: i) R 2 figures belonging to different accounting regimes (Morais and Curto ; Paananen and Lin ); and ii) R 2 figures by using different accounting items (Demir et al. ; Pervan and Bartulović ). Morais and Curto () compare the R 2 figure belonging to Portuguese GAAP‐based reporting period and the R 2 figure belonging to International Accounting Standards (IAS)/IFRS‐based reporting period, and they conclude that IAS/IFRS‐based reporting is less value relevant than Portuguese GAAP‐based reporting.…”

Section: Selected Literaturementioning

confidence: 99%

“…Demir et al. () interpret the VR of several income measures, and they reveal that the R 2 figure obtained by using only comprehensive income is greater than the R 2 figure obtained by using only net income . They also extend their analyses by separately adding each other's comprehensive income item to net income and interpret the corresponding R 2 figures.…”

Section: Selected Literaturementioning

confidence: 99%

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How Does Unobserved Heterogeneity Affect Value Relevance?

Ertuğrul

Demir

2018

Australian Accounting Review

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Most value relevance (VR) studies consider an accounting item value relevant if the regression coefficient (RC) of that item is statistically significant. Unobservable heterogeneity leads to biased RCs, interpretation of which generates incorrect inferences. To obtain unbiased RCs, the effect of unobservable heterogeneity on RCs should be mitigated. As two dimensions of unobservable heterogeneity are at the firm level and time level, outcomes with the following unobservable heterogeneity concerns are discussed: i) no fixed-effects (FE); ii) firm FE; iii) time FE; and iv) two-way (firm and time) FE. By employing a sample of Turkish firms from 2005-2014, we report several findings. First, we find that regressions with firm (time) FE yield large (low) RCs vis-à-vis regressions with no FE, and regressions with two-way FE generate balanced RCs compared to the others. Second, we compare RCs with i and iv, and conclude that the book value of equity becomes more value relevant while net income does not after controlling for unobservable heterogeneity. Last, we arbitrarily divide the entire period into two to reveal how unobserved endogeneity affects the comparison of RCs belonging to different periods. Our outcomes robustly reveal that unobserved endogeneity leads to erroneous RC comparisons.

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Section: Selected Literaturementioning

confidence: 99%

Section: Selected Literaturementioning

confidence: 99%

How Does Unobserved Heterogeneity Affect Value Relevance?

Ertuğrul

Demir

2018

Australian Accounting Review

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“…Although our study builds upon the studies by Dhaliwal et al (1999) and Demı̇r et al (2013) it differs in three important ways. First, besides return and operating cash flow models used by Dhaliwal et al (1999), price models are included.…”

Section: Methodsmentioning

confidence: 99%

“…Secondly, different from Dhaliwal et al (1999) and Demı̇r et al (2013), we examine the association between price, market returns and operating cash flows between income items (net income vs. comprehensive income) using the actual data (rather than as if data) related to comprehensive income (itself and its components) in the post-adoption periods of SFAS 130 for a sample of Turkish firms. Using actual data provides the opportunity to make more accurate and reliable inferences about usefulness and effectiveness of comprehensive income by decreasing measurement error (Kanagaretnam et al, 2009).…”

Section: Methodsmentioning

confidence: 99%

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Comparing the Usefulness of Net Income Versus Comprehensive Income in Terms of Firm Performance: Borsa Istanbul Case

Acar¹,

Karacaer²

2017

International Review of Economics and Management

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Based on the ongoing claims that comprehensive income measures financial performance better than net income, thus enhance the transparency and usefulness of financial statements, International Accounting Standard No.1 (IAS 1) allows reporting comprehensive income in a primary and separate financial statement. From this point forth, we compare the usefulness of comprehensive income with net income in terms of financial performance proxied by stock price, stock returns and operating cash flows. Using a sample of listed companies in Turkey, we find some evidence that comprehensive income is a better measurement than net income, especially explaining stock price and market returns. However, the association between comprehensive income and stock price is negative. In that sense, our findings are consistent with previous researches arguing that investors find the financial information in comprehensive income is more volatile, risky, transitory and incomplete than net income, resulting in decreased stock price.

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Borsa İstanbul Şirketlerinin Kapsamlı Gelir Raporlama Uygulamaları Üzerine Bir Araştırma

Kılıç¹

2019

Journal of Yaşar University

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Comprehensive income is becoming an increasingly important corporate performance indicator. The main purpose of this study is to analyze comprehensive income statements of the entities on Borsa Istanbul (BIST) with respect to their content throughout the years between 2009 and 2017. Further, this study also aims to investigate the impact of other comprehensive income items on the total comprehensive income and profitability ratios by employing Wilcoxon signed-rank test. According to the findings of the study, the number of the entities reporting other comprehensive income items has increased significantly between 2009 and 2017. Further, the results show that other comprehensive income items have a statistically significant impact on both the total comprehensive income and profitability ratios except for the years 2012 and 2014.

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What is the Best Measure of Financial Performance? Comprehensive Income versus Net Income: Evidence from Turkey

Cited by 4 publications

References 0 publications

How Does Unobserved Heterogeneity Affect Value Relevance?

How Does Unobserved Heterogeneity Affect Value Relevance?

Comparing the Usefulness of Net Income Versus Comprehensive Income in Terms of Firm Performance: Borsa Istanbul Case

Borsa İstanbul Şirketlerinin Kapsamlı Gelir Raporlama Uygulamaları Üzerine Bir Araştırma

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