Template-Type: ReDIF-Article 1.0
Author-Name: Rogelio J. Cardona 
Title: REVISITING THE RELATIONSHIP BETWEEN OPTION EXPENSING AND STOCK RETURNS 
Abstract: In 2002, the Financial Accounting Standards Board allowed corporations to recognize stock options as
an expense on their financial statements on a voluntary basis. Option expensing became mandatory in
2004. This investigation uses two different models to reexamine the effects of the announcement of the
voluntary expensing of stock options (when expensing was not mandatory) on the abnormal stock returns
for a group of firms. We find that, as expected, investors prefer firms that initiated expensing stock
options to firms that did not announce they were going to expense them. However, when we compared
the stock returns of the announcing firms with the Market’s expectations we found opposite results. This
discrepancy suggests that announcing firms possess certain attributes that differentiate them from the
firms included in the Market model. The required expensing of stock options has not eliminated their
controversial nature. After investigating the different effects of expensing options, future research efforts
should move towards trying to understand how these effects are transmitted to the market. If analysts are
in effect ignoring stock-option expense in their earnings forecasts, as suggested by Barth, Gow and
Taylor (2009), then the controversy over the reporting of stock options has only just begun.
Classification-JEL: G14, G30, M41, M48  
Keywords: Event study, stock options, average stock returns, abnormal returns, cumulative average
abnormal returns
Journal: Accounting & Taxation
Pages: 1-16 
Volume: 3
Issue:2
Year: 2011
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v3n2-2011/AT-V3N2-2011-1.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:3:y:2011:i:2:p:1-16

Template-Type: ReDIF-Article 1.0
Author-Name: Abdulkareem Alzarouni
Author-Name: Khaled Aljifri
Author-Name: Chew Ng
Author-Name: Mohammad Iqbal Tahir 
Title:  THE USEFULNESS OF CORPORATE FINANCIAL REPORTS: EVIDENCE FROM THE UNITED ARAB EMIRATES
Abstract: The purpose of this paper is to examine the usefulness of financial reports to users in the United Arab
Emirates (UAE). It is an attempt to find out whether current practices satisfy users’ needs of information
and the extent to which these needs have been satisfied by the current disclosure practices of UAE
companies. A survey questionnaire was used to explore whether the financial reports published by UAE
firms were relevant to the needs of their users and to identify the disclosure items they perceived as
important. Of the 512 questionnaires distributed to major external users of financial reports, 404 were
returned. The results indicate that users in the UAE consider corporate annual reports to be the most
important source of information. However, the level of corporate financial disclosure in the UAE does not
provide sufficient information to the users. In fact, it meets only 61% of the needs reported by external
users of financial reports. The users also nominated several areas of concerns, including delays in the
availability of annual reports, the lack of creditability of financial information, and the non-accessibility
of financial reports. 
Classification-JEL: M4, M41 
Keywords: Corporate financial disclosure, information needs, user groups, usefulness, UAE firms,
annual reports
Journal: Accounting & Taxation
Pages: 17-37
Volume: 3
Issue: 2
Year: 2011
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v3n2-2011/AT-V3N2-2011-2.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:3:y:2011:i:2:p:17-37

Template-Type: ReDIF-Article 1.0
Author-Name: Ganna Demydyuk
Title: OPTIMAL FINANCIAL KEY PERFORMANCE INDICATORS: EVIDENCE FROM THE AIRLINE INDUSTRY
Abstract: Selecting relevant Key Performance Indicators involves an assessment of both cost- and revenue-driven
measures. Cost driven allocation usually predominates, due primarily to a traditional accounting mindset
coupled with the need for cost savings in the current economic environment. Using data from the airline
industry in all of the major markets in the world, this paper demonstrates that revenue- or profit-driven
KPIs, consistently applied, will more likely lead to better financial performance than ‘flying’ the business
based on cost-driven metrics or those representing a mixture of revenue target and cost-driven metrics.
Specifically it examines the effectiveness of models that characterize performance based on two performance
indicators, in particular – seats and passenger-kilometers. We document strong evidence indicating
that Operating Profit per Passenger or per Passenger-Kilometer is the most significant variable when
it comes to explaining the variation in airline profitability. Our conclusion is that despite the traditional
belief that measuring performance per seat is only appropriate for point-to-point destination services,
typically provided by Low Cost Carriers, the same model also fits Full Service Network Carriers and
thus, can be used by them as a meaningful tool for financial targeting and strategic decision-making.
Classification-JEL: M40; M41; M21
Keywords: Financial KPI’s, airline financial performance, airline financial KPI’s, profit driving indicators,
revenue drivers, profit drivers, key performance drivers, key profit drivers
Journal: Accounting & Taxation
Pages: 39-51
Volume: 3
Issue:2
Year: 2011
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v3n2-2011/AT-V3N2-2011-3.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:3:y:2011:i:2:p:39-51

Template-Type: ReDIF-Article 1.0
Author-Name: Jacek Welc
Title: MEAN-REVERSION OF NET PROFITABILITY AMONG POLISH PUBLIC COMPANIES
Abstract: Abundant research shows that the feature of corporate financial results is the long-term reversion toward
the levels average for the whole economy. In the case of earnings this means that companies which in a
given year show above-average profitability in the following periods express the tendency to show
decreasing profitability and companies which in a given year show below-average profitability in the
following periods express the tendency to show increasing profitability. However, the research related to
the existence of this phenomenon in the case of emerging economies is scarce so far. Therefore, we
explore the reversion toward the mean of the net profitability of companies listed on the Warsaw Stock
Exchange in the period of 2000-2009 years. We tested the hypothesis that the companies with aboveaverage
/ below-average net profitability in any year tend to experience the significant decrease /
increase of this relative profitability in the following years. The research confirmed the strong tendency of
net profitability to revert toward the economy-wide mean. However, according to our estimates, the
process of total reversion to the mean takes about 8-9 years in the case of Polish public companies’ netprofitability.
Classification-JEL: M41, G30 
Keywords: mean-reversion of earnings, corporate profitability, forecasting earnings
Journal: Accounting & Taxation
Pages:53-64
Volume: 3
Issue: 2
Year: 2011
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v3n2-2011/AT-V3N2-2011-4.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:3:y:2011:i:2:p:53-64

Template-Type: ReDIF-Article 1.0
Author-Name: Mishari M. Alfaraih
Author-Name: Faisal S. Alanezi
Title: DOES VOLUNTARY DISCLOSURE LEVEL AFFECT THE VALUE RELEVANCE OF ACCOUNTING INFORMATION?
Abstract: This paper seeks to explore whether voluntary disclosure level affects the value relevance of accounting
information from an investor’s perspective on Kuwait Stock Exchange (KSE). Based on the assumption
that an increased focus on the informational needs of investors should increase the value relevance of the
information contained in financial statements we expect that value relevance will increase along with
increases in the level of voluntary disclosure. As a consequence, we expect that greater voluntary
disclosure levels among companies listed on the KSE will be associated with greater value relevance in
earnings and book value information for investors. The results show the average level of voluntary
disclosure for KSE-listed firms in 2007 was 22%, ranging from 2% to 63%. The results for the price and
returns models provide evidence that earnings and book values are significant factors in the valuation of
KSE-listed firms in 2007 period. However, the results show that voluntary disclosure levels had
insignificant influence on the value relevance of earnings and book values. The insignificant association
found could be due in part to the large proportion of naïve investors in the KSE and could be reflective of
their incapability to incorporate voluntary disclosure information in their valuations of KSE firms.
Classification-JEL: G11, G12, G17, M41 
Keywords: Voluntary disclosure, value relevance, emerging markets
Journal: Accounting & Taxation
Pages: 65-84
Volume: 3
Issue: 2
Year: 2011
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v3n2-2011/AT-V3N2-2011-5.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:3:y:2011:i:2:p:65-84

Template-Type: ReDIF-Article 1.0
Author-Name: Bernardo Quintanilla
Author-Name: Jesús Téllez
Author-Name: L. A. Wolfskill
Title: BANK RISK FUNDAMENTALS AND REGULATORY DISCIPLINE IN THE MEXICAN BANKING SECTOR
Abstract: The 1994 Mexican banking crisis led to wholesale changes in the deposit insurance fund in the country’s
banking system. Poor lending decisions allowed banks to transfer risk to the fund, resulting in their
capturing returns on performing loans, while limiting downside exposure when the fund covered losses on
non-performing loans. Through a series of programs, the Mexican banking system now uses performance
bonds in concert with the insurance fund. The bonds adjust in price based on the level of risk, and
purport to measure the level of safety for the fund. We measure the effect of regulator actions by
monitoring performance bond price levels over a 104-month period. Key bank ratios in the areas of
liquidity, profitability, activity, and leverage were collected on the largest seven national banks, which
control 87% of the capital in the banking system. Through a regression analysis, effects of these bank
indicators demonstrate that, while not all are useful for predicting risk reduction and safety net viability,
overall the banking regulators have incentivized lending institutions to reduce the occurrence of riskshifting.
This has led to a more stable banking system, and a more effective safety net for deposits.
Classification-JEL: F34; G15; G18, G28  
Keywords: Mexican banking system, Financial safety net, Deposit Insurance Fund, FOBAPROA,
FONAPRE, IPAB, BPA
Journal: Accounting & Taxation
Pages: 85-95
Volume: 3
Issue: 2
Year: 2011
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v3n2-2011/AT-V3N2-2011-6.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:3:y:2011:i:2:p:85-95

Template-Type: ReDIF-Article 1.0
Author-Name: Anne B. Fosbre
Author-Name: Ellen M. Kraft,
Author-Name: Paul B. Fosbre,
Title: US ADOPTION OF IFRS MAY HELP TO JUMPSTART THE US ECONOMY
Abstract: The United States prompt adoption of International Financial Reporting Standards (IFRS) may help to
jumpstart the US economy. Investors would be able to make comparisons and evaluate investment
opportunities worldwide. US Multinational companies would be able to cut costs. In preparation of
financial statements using IFRS the results presented usually portray higher figures. This would help to
present more favorable valuations and help to promote growth with improved financial reporting. The
result will be more job opportunities, a reduction in uncertainties, and may help to jumpstart the US
economy. This paper examines existing differences in required reporting by the SEC as well as other
factors affecting the adoption of IFRS in the US. We will review the effects of not adopting IFRS that may
have contributed to the delay in the recovery of the US economy and the uncertainty that has been
created.
Classification-JEL: M41, M48
Keywords: IFRS, US economy, FIFO, LIFO
Journal: Accounting & Taxation
Pages: 109-118
Volume: 3
Issue:2
Year: 2011
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v3n2-2011/AT-V3N2-2011-7.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:3:y:2011:i:2:p:109-118

Template-Type: ReDIF-Article 1.0
Author-Name: Lindrianasari
Author-Name: Jogiyanto Hartono,
Title: THE RELATIONSHIP BETWEEN ACCOUNTING PERFORMANCE AND CEO TURNOVER: EVIDENCE FROM INDONESIA
Abstract: This study provides empirical evidence regarding the usefulness of accounting information in the issue of
CEO turnovers. Previous research shows inconclusive results about the relationship between accounting
performance and CEO turnover. Moreover the topic of CEO turnover is still rarely examined in nonwestern
countries, such as in Indonesia. This study used data on all companies that were identified as
having undergone CEO, President Director for Indonesia, turnovers from 1998-2006. Other firms were
included as a control sample. The sample used for testing included 140 companies, consisting of 81
companies with turnovers and 59 companies as a control. Final samples were determined after
considering the availability of data and the confounding effects in the period observed. Hypotheses were
tested using Logit regression because the dependent variable used is a binary variable, with the notation
1 for turnover and 0 for others. The results show that accounting performance had a statistically
significant negative influence over the turnover decision. However, turnover did not affect accounting
performance.
Classification-JEL: M4  
Keywords: CEO Turnover, Accounting Performance, Antecedent Factors, Concequences Factors,
Routine and Non-Routine Turnover.
Journal: Accounting & Taxation
Pages: 97-107
Volume: 3
Issue:2
Year: 2011
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v3n2-2011/AT-V3N2-2011-8.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:3:y:2011:i:2:p:97-107

Template-Type: ReDIF-Article 1.0
Author-Name:Luciana Spica Almilia 
Title: VALUE RELEVANCE OF ACCOUNTING INFORMATION USING AN ERROR CORRECTION MODEL
Abstract: Studies of accounting information value relevance are often based on the scale of R2 value. However,
Insukindro (1998) states that a high R2 coefficient does not imply that a model is superior. When linear
regression estimation produces a high coefficient of R2 but it is not consistent with the theory or it does
not pass the classic linear regression assumption test, the model may be inferior. In this case, the model
should not have been chosen as the best empirical model. This study contributes to the accounting
information value relevance literature by providing a new econometric analysis in a value relevance
model. The research samples consisted of 81 manufacturing companies, including 324 firm years, listed
on the Indonesian Stock Exchange from 2003 to 2007. The results of this study indicate that the error
correction models play a role in determining the value relevance of accounting information.
Classification-JEL: G12; G14; M41 
Keywords: Value Relevance, Earnings, Book Value Equity, Cash Flow, Error Correction Model,
Error Correction Terms
Journal: Accounting & Taxation
Pages: 119-131
Volume: 3
Issue:2
Year: 2011
File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v3n2-2011/AT-V3N2-2011-9.pdf
File-Format: Application/pdf
Handle: RePEc:ibf:acttax:v:3:y:2011:i:2:p:119-131