“How Country Wealth Relates to Controlling-usefulness and Valuation-usefulness of Accounting Information? International Evidence”

Project Objectives:

The objective of this research proposal is to empirically test how country wealth relates to two objectives of financial reporting: controlling-usefulness and valuation-usefulness.

Project activities and outcomes:

Ball (2016) has suggested that wealthy economies are likely to invest more in establishment and development of country-level financial reporting infrastructures such as financial, legal and political systems, which, ultimately, should lead to better accounting quality. Opposed to this, Pirveli et al. (forthcoming) argued that wealthy economies are likely to build efficient legal and political, but not necessarily strong (capital-market-based) financial systems. If so, based on the theory of financial intermediation, country wealth should reflect into higher demand for controlling-useful but not necessarily for valuation-useful accounting information. This research project will empirically address the existing theoretical (intuition-based) argumentations. The sample will consist of a large number of countries’ capital markets with the sufficient firm-level market and financial data utilized within the methodological part of the work. Country wealth, controlling-usefulness and valuation-usefulness of accounting information will be proxied by GDP per capita, conditional accounting conservatism and value relevance of earnings and book values, consequently.

Project starting and finishing dates: 16.06.2018 – 15.03.2019

Coordinator University: Ludwig Maximilan University in Munich, Germany

The list of Project Partner Universities: Caucasus University, Georgia

Principal Investigator: Prof. Dr. Erekle Pirveli