Empirical Evidence on the Evolution of International Earnings

Posted: 14 Feb 2003

See all articles by Judy Land

Judy Land

University of North Carolina (UNC) at Chapel Hill - Accounting Area

Mark H. Lang

University of North Carolina at Chapel Hill

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Abstract

We examine whether cross-country differences in earnings-to-price multiples have changed between 1987-1992 versus 1994-1999. Our results suggest that earnings multiples became more similar over this time period for the jurisdictions we analyze, although systematic differences remain. Economic determinants of earnings multiples (e.g., growth rates, interest rates, and returns) do not exhibit similar convergence and do not appear to explain the changes. The convergence is robust to controls for cash flow multiples and is apparent in the valuation of accruals. Accrual/cash flow correlations have also become more similar and generally less negative, suggesting a reduction in earnings smoothing. Overall, our evidence suggests convergence in accounting practice.

Keywords: international accounting, international valuation, accounting harmonization, accounting multiples

JEL Classification: M41, M44, M47, G12, G15

Suggested Citation

Land, Judy and Lang, Mark H., Empirical Evidence on the Evolution of International Earnings. The Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=369302

Judy Land

University of North Carolina (UNC) at Chapel Hill - Accounting Area ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
(919) 962-4727 (Phone)

Mark H. Lang (Contact Author)

University of North Carolina at Chapel Hill ( email )

Kenan-Flagler Business School
McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-1644 (Phone)
919-962-4727 (Fax)

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