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An investigation into the stock market reaction to press notices issued by the Financial Reporting Review Panel

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An investigation into the stock market reaction to press notices issued by the Financial Reporting Review Panel. / Hines, Tony; McBride, Karen; Page, Mike.

In: Journal of Applied Accounting Research, Vol. 5, No. 2, 12.1999, p. 54-82.

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@article{009ea7f0a27f402d8c7b0c7e080c1168,
title = "An investigation into the stock market reaction to press notices issued by the Financial Reporting Review Panel",
abstract = "The Financial Reporting Review Panel ({\textquoteleft}the Panel{\textquoteright}) was set up in 1991 as part of the new regime under the Financial Reporting Council, with the objective of improving the quality of financial reporting in the UK. Arguably, the Panel was the most radical innovation since it was concerned with the previously not addressed issue of the enforcement of financial reporting regulations. However, it has no direct powers of enforcement and is funded at a level at which it can only react to complaints about company accounts rather than seek out problems. While the Panel has been granted powers to take companies to court with a view to compelling them to revise their accounts, these powers have not been exercised. Nevertheless, there is some evidence that its existence encourages companies to be more scrupulous about compliance with accounting standards and relevant company law before publishing their annual reports. Explanations for compliance include the possibility that adverse findings by the Panel result in economic damage or loss of reputation to the company or its management. This paper investigates a key aspect of possible economic damage: that press notices issued by the Panel about individual cases have an adverse effect on the share price of the company concerned. A share price event study was carried out on 33 companies that, since the inception of the Panel, had been the subject of press notices. We have found no evidence of an adverse share price reactions following the publication of press notices. Improvements in compliance may be attributable to other reasons, one possibility being the belief by management that an adverse finding will affect the share price.",
author = "Tony Hines and Karen McBride and Mike Page",
year = "1999",
month = dec,
doi = "10.1108/96754269980000789",
language = "English",
volume = "5",
pages = "54--82",
journal = "Journal of Applied Accounting Research",
issn = "0967-5426",
publisher = "Emerald Group Publishing Ltd.",
number = "2",

}

RIS

TY - JOUR

T1 - An investigation into the stock market reaction to press notices issued by the Financial Reporting Review Panel

AU - Hines, Tony

AU - McBride, Karen

AU - Page, Mike

PY - 1999/12

Y1 - 1999/12

N2 - The Financial Reporting Review Panel (‘the Panel’) was set up in 1991 as part of the new regime under the Financial Reporting Council, with the objective of improving the quality of financial reporting in the UK. Arguably, the Panel was the most radical innovation since it was concerned with the previously not addressed issue of the enforcement of financial reporting regulations. However, it has no direct powers of enforcement and is funded at a level at which it can only react to complaints about company accounts rather than seek out problems. While the Panel has been granted powers to take companies to court with a view to compelling them to revise their accounts, these powers have not been exercised. Nevertheless, there is some evidence that its existence encourages companies to be more scrupulous about compliance with accounting standards and relevant company law before publishing their annual reports. Explanations for compliance include the possibility that adverse findings by the Panel result in economic damage or loss of reputation to the company or its management. This paper investigates a key aspect of possible economic damage: that press notices issued by the Panel about individual cases have an adverse effect on the share price of the company concerned. A share price event study was carried out on 33 companies that, since the inception of the Panel, had been the subject of press notices. We have found no evidence of an adverse share price reactions following the publication of press notices. Improvements in compliance may be attributable to other reasons, one possibility being the belief by management that an adverse finding will affect the share price.

AB - The Financial Reporting Review Panel (‘the Panel’) was set up in 1991 as part of the new regime under the Financial Reporting Council, with the objective of improving the quality of financial reporting in the UK. Arguably, the Panel was the most radical innovation since it was concerned with the previously not addressed issue of the enforcement of financial reporting regulations. However, it has no direct powers of enforcement and is funded at a level at which it can only react to complaints about company accounts rather than seek out problems. While the Panel has been granted powers to take companies to court with a view to compelling them to revise their accounts, these powers have not been exercised. Nevertheless, there is some evidence that its existence encourages companies to be more scrupulous about compliance with accounting standards and relevant company law before publishing their annual reports. Explanations for compliance include the possibility that adverse findings by the Panel result in economic damage or loss of reputation to the company or its management. This paper investigates a key aspect of possible economic damage: that press notices issued by the Panel about individual cases have an adverse effect on the share price of the company concerned. A share price event study was carried out on 33 companies that, since the inception of the Panel, had been the subject of press notices. We have found no evidence of an adverse share price reactions following the publication of press notices. Improvements in compliance may be attributable to other reasons, one possibility being the belief by management that an adverse finding will affect the share price.

U2 - 10.1108/96754269980000789

DO - 10.1108/96754269980000789

M3 - Article

VL - 5

SP - 54

EP - 82

JO - Journal of Applied Accounting Research

JF - Journal of Applied Accounting Research

SN - 0967-5426

IS - 2

ER -

ID: 121526