An Investigation Into the Usefulness of Publicly Disclosed Accounting Earnings Data in Valuing the Foreign Operations of U.S.-based Multinational Enterprises
Senteney, David L.
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https://hdl.handle.net/2142/71407
Description
Title
An Investigation Into the Usefulness of Publicly Disclosed Accounting Earnings Data in Valuing the Foreign Operations of U.S.-based Multinational Enterprises
Author(s)
Senteney, David L.
Issue Date
1987
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Accounting
Abstract
This study investigates the usefulness of accounting data in valuing the foreign operations of U.S.-based MNEs. This task is carried out by examining the relationship between three sets of variables. The three sets are: (1) conditions in the economic environment, (2) accounting data, and (3) economic constructs. The conditions in the economic environment are hypothesized as being reflected in the accounting data. The accounting data, in turn, are hypothesized as being reflected in the economic variables.
The investigation of these relationships is carried out using a simultaneous equations approach to statistical estimation. The jointly-determined variables are economic variables. The independent variables are accounting variables. The usefulness of the accounting data in assessing the economic relationships and prevailing conditions in the economic environment is evaluated via the sign and magnitude of the coefficients. Hypotheses concerning these coefficients are derived a priori from the extant literature.
The results of the statistical tests of hypotheses indicate the accounting data are significantly related to the economic variables, and the economic variables are significantly related to one another. The accounting data are related to the economic variables as expected. However, the economic variables reflect the effects of segmentation.
The conclusions are that: (1) accounting data are useful in assessing the economic profits accruing to MNEs, (2) accounting data may be useful in assessing the riskiness of those profits, though additional research is required, (3) accounting data are useful in valuing the foreign operations of MNEs, (4) competition among MNEs may have eroded the premium attributable to financial intermediation, (5) segmentation may be high, and (6) there is incentive for MNEs to take on additional operating systematic risk.
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