Do alternative methods of reporting non-controlling interests really matter?

Ana I Lopes, Isabel Lourenço and Mark Soliman
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Ana I Lopes: Department of Accounting, ISCTE-IUL Business School, Lisbon University Institute (ISCTE-IUL), Portugal
Isabel Lourenço: UNIDE, Department of Accounting, ISCTE-IUL Business School, Lisbon University Institute (ISCTE-IUL), Portugal
Mark Soliman: University of Southern California, USA

Australian Journal of Management, 2013, vol. 38, issue 1, 7-30

Abstract: Researchers have long been interested in whether the classification of various items on the balance sheet matters to investors. This paper provides evidence on whether reporting non-controlling interests (NCI) as equity or as non-equity matters in terms of value relevance. We use a sample of German firms that voluntary adopted International Financial Reporting Standards early. This adoption required them to change their reporting of NCI from the non-equity to the equity portion of the balance sheet. After conducting sensitivity tests for self-selection bias and controlling for weight of NCI, firm size and leverage, our results suggest that NCI are priced by the market in the same manner irrespectively of being reported as equity or non-equity. This finding reinforces the notion that equity markets are efficient in their processing of information, regardless of the classification by standard setters. JEL Classification: M41-Accounting.

Keywords: Changes to standards; consolidated statement of financial position; non-controlling interests; recognition versus disclosure (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:38:y:2013:i:1:p:7-30

DOI: 10.1177/0312896212458788

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