Journal of Applied Research in Accounting and Finance (JARAF), Vol. 5, No. 1, 2010
7 Pages Posted: 10 Aug 2010 Last revised: 18 Aug 2014
Date Written: August 9, 2010
As we approach the second anniversary of perhaps the watershed moment of the global financial crisis, the demise of Lehman Brothers, certain of the ongoing effects of that episode have emerged into clearer relief.The continuing tendency of retail and institutional investors to hoard liquidity and to shift down the risk curve has left obvious marks. Equity markets continue to suffer, whilst markets for securitised and structured finance products remain, in effect, in a state of suspension.
The confidence which leached out of the financial system for more than a year in the lead up to the Lehman collapse, the remaining residue of which vaporised in the tempest of panic unleashed at that juncture, has not returned. In its place, uncertainty and skittishness dominate.
This change in market thinking in relation to risk and value is also confronting those for whom a central element of their day to day activity is the contemplation of value, its sources and how best to measure and forecast it. It is this confrontation with questions in relation to the estimation or derivation of value which is the golden thread which runs through this edition of the journal.
In their thought provoking contribution, Baetge, Kirsch, Koelen and Schulz confront and do some violence to a long standing shibboleth of corporate valuation – the not insignificant matter of the size premium. Drawing upon both empirical evidence and an alternative conceptualisation of the appropriate basis upon which to draw upon the CAPM as an aspect of corporate valuation, this paper should serve as a basis for provoking a more circumspect treatment of size in the context of value estimation.
Looking at a different element of the discount rate selection problem, Jindra and Voetmann have contributed a stimulating rejoinder to Wayne Lonergan’s piece on pre and post-tax discount rates published in Volume 4(1).This contribution is pleasing on two dimensions. First, it adds distinctively to this important but relatively poorly understood dimension of the valuation process chain.
Second, it demonstrates the capacity for JARAF to serve as a crucible for well-reasoned conversations between members of the applied accounting and finance community. Consequently, we take this opportunity to underscore the importance we place on this aspect of manuscripts submitted to the journal for review and encourage authors to see the pages of the journal as a forum for lively, well-reasoned debate.
In our estimation,Valentine’s piece on the calculation of damages in the context of shareholder lawsuits against corporations represents an excellent anchor point for just such an interchange. With the rise of uncertainty in the wake of the global financial crisis has come a greater thirst for remedy in the face of loss.
In the Australian context, echoing the experience elsewhere, this has most obviously manifested in the rise of shareholder class actions, particularly in the wake of the clarification of the boundaries for operation of litigation funding.This raises inevitable questions of policy as well as practice which will be resolved only with the benefit of considerable advances on the current state of thinking.Valentine’s pragmatic rationalisation of a way forward for the estimation of quantum of loss represents an excellent foundation for further discussion and analysis.
As with previous editions of the journal, we continue to balance contributions from authors engaged in both the domain of practice and the academy and from across the globe.This would not be possible without the active engagement of contributors and the continued strong support of our editorial board and team of reviewers, to whom we express our very sincere gratitude once again.
Keywords: financial reporting
JEL Classification: M40, M41
Suggested Citation: Suggested Citation