The Value Relevance of Accounting Under Political Uncertainty: Evidence Related to Quebec's Independence Movement

20 Pages Posted: 7 Feb 2005

See all articles by Roger C. Graham

Roger C. Graham

Oregon State University

Cameron K.J. Morrill

University of Manitoba - Department of Accounting and Finance

Janet B. Morrill

University of Manitoba - Department of Accounting and Finance

Abstract

The Canadian province of Quebec is a region of an advanced industrialized nation characterized by a strong independence movement and, therefore, provides an interesting context in which to test the effect of political uncertainty on the relationship between market values and accounting values. In this study we compare market-to-book value associations of a sample of firms headquartered in Quebec with those of a sample of Canadian firms headquartered outside Quebec, over the period 1988-2002. Our comparisons suggest that, on average, the value of Quebec-based firms is significantly less than other Canadian firms when valuation is based on multiples of book value and earnings. In addition, we find that the 'Quebec discount' decreased significantly in the period immediately following the 1995 provincial sovereignty referendum wherein Quebeckers voted (narrowly) against Quebec sovereignty. We conclude that the relative undervaluation of Quebec firms is related, at least in part, to political uncertainty associated with the Quebec independence movement.

JEL Classification: G12, M41, H10

Suggested Citation

Graham, Roger C. and Morrill, Cameron K.J. and Morrill, Janet B., The Value Relevance of Accounting Under Political Uncertainty: Evidence Related to Quebec's Independence Movement. Journal of International Financial Management & Accounting, Vol. 16, No. 1, pp. 49-68, March 2005. Available at SSRN: https://ssrn.com/abstract=651607

Roger C. Graham (Contact Author)

Oregon State University ( email )

424 Austen Hall
Corvallis, OR 97331
United States
541-737-4028 (Phone)
541-737-4890 (Fax)

Cameron K.J. Morrill

University of Manitoba - Department of Accounting and Finance ( email )

Faculty of Management
Winnipeg, MB R3T 5V4
Canada
204-474-8435 (Phone)
204-474-7545 (Fax)

Janet B. Morrill

University of Manitoba - Department of Accounting and Finance ( email )

Faculty of Management
Winnipeg, MB R3T 5V4
Canada

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
33
Abstract Views
1,913
PlumX Metrics