Ownership Structure and Accounting Method Choice: A Study of European Real Estate Companies
2016 (English)In: Accounting in Europe, ISSN 1744-9480, E-ISSN 1744-9499, Vol. 13, no 1, 1-19 p.Article in journal (Refereed) Published
Companies can under IAS 40 Investment Properties choose between the fair value and the cost models. The fair value model arguably results in more relevant information but is also more costly to use. Based on studies suggesting that financial reports are a more important medium for communication with investors if ownership is dispersed, we hypothesize that the use of the fair value model is positively associated with ownership-dispersion. We study European Real Estate firms and find support for this prediction. We also find a positive association between trade of shares and ownership-dispersion, supporting the view that financial statements are less important if ownership-concentration is high. Finally, we examine whether the choice depends on the identity of large owners. Companies with a financial company as the largest owner are somewhat more likely to choose the fair value model. Overall, the results indicate that accounting rules facilitating optional accounting policies have benefits.
Place, publisher, year, edition, pages
Routledge, 2016. Vol. 13, no 1, 1-19 p.
accounting method choice, IAS 40, ownership structure, investment property, fair value
Research subject Business Studies
IdentifiersURN: urn:nbn:se:umu:diva-119504DOI: 10.1080/17449480.2016.1154180OAI: oai:DiVA.org:umu-119504DiVA: diva2:921741