Corporate Governance: Is the crisis over?
Speaker: Professor Utpal Bhattacharya van LaSalle Bank Faculty Fellow and Associate Professor of Finance, Kelley School of Business, Indiana University
Location: Radisson Sas Hotel, Rusland 17, Amsterdam
Bad as the recent accounting scandals in America have been, U.S. companies still report their profits more accurately than those in any other country, shows a worldwide study on transparency by professor Utpal Bhattacharya of Indiana University and others. Using data from nearly 60,000 companies from 1985 to 1998, the authors ranked 34 countries on three negative criteria: “earnings aggressiveness”, or booking gains early and losses late; “loss avoidance, “or tweaking the timing of results to turn small losses into small gains; and “earnings smoothing,” cooking the books to suppress both large gains and large losses. The more companies in a given country exhibited any of these traits, the lower the country’s transparency ranking. The U.S. had the highest overall rank for earnings transparency, and it ranked among the top six countries on each of the three criteria. Its lowest ranking, sixth, was on earnings aggressiveness. So far, the U.S. reaps the advantage of a lower cost of capital from this perception of transparency. Bhattacharya estimates that the cost of capital is about 3% lower for a typical country in the top half of the rankings than for one in the bottom half. Bhattacharya also says that although he doesn’t have international data since 1998, he believes that U.S. companies still have the most transparent accounts, scandals notwithstanding.” (cited from http://www.kelley.iu.edu/ubhattac/ )
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* Talk by Professor Utpal Bhattacharya