America the Transparent
Tuesday, July 16 2002 @ 09:03 AM MDT
Contributed by: Anonymous
Views: 1,003
America the Transparent
http://www.businessweek.com/magazine/content/02_29/c3792032.htm#B3792035
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 study by finance professors Utpal Bhattacharya of
Indiana University and Hazem Daouk of the University of Michigan, and
accounting professor Michael Welker of Queen's University in Kingston,
Ont.
Using data from nearly 60,000 companies from 1985 to 1998, the authors
ranked 34 countries on three negative criteria: America the Transparent
http://www.businessweek.com/magazine/content/02_29/c3792032.htm#B3792035
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 study by finance professors Utpal Bhattacharya of
Indiana University and Hazem Daouk of the University of Michigan, and
accounting professor Michael Welker of Queen's University in Kingston,
Ont.
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 (chart),
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.
The U.S. Still Sets The Standard
Earnings Transparency of the G-7*
Rank Country
1 U.S.
7 Canada
8 France
11 Britian
15 Germany
27 Italy
29 Japan
*Rank among 34 countries based on how well reported profits reflect
actual results
Data: Bhattacharya, Daouk, Welker
http://www.kelley.iu.edu/ubhattac/earnings.pdf
http://www.businessweek.com/magazine/content/02_29/c3792032.htm#B3792035
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 study by finance professors Utpal Bhattacharya of
Indiana University and Hazem Daouk of the University of Michigan, and
accounting professor Michael Welker of Queen's University in Kingston,
Ont.
Using data from nearly 60,000 companies from 1985 to 1998, the authors
ranked 34 countries on three negative criteria: America the Transparent
http://www.businessweek.com/magazine/content/02_29/c3792032.htm#B3792035
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 study by finance professors Utpal Bhattacharya of
Indiana University and Hazem Daouk of the University of Michigan, and
accounting professor Michael Welker of Queen's University in Kingston,
Ont.
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 (chart),
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.
The U.S. Still Sets The Standard
Earnings Transparency of the G-7*
Rank Country
1 U.S.
7 Canada
8 France
11 Britian
15 Germany
27 Italy
29 Japan
*Rank among 34 countries based on how well reported profits reflect
actual results
Data: Bhattacharya, Daouk, Welker
http://www.kelley.iu.edu/ubhattac/earnings.pdf
