Vera Palea | International University College of Turin (IUC) (original) (raw)

Papers by Vera Palea

Journal of Cleaner Production, 2022

The worldwide recession caused by the financial market crisis has raised widespread criticism on ... more The worldwide recession caused by the financial market crisis has raised widespread criticism on free stock market-based capitalism, highlighting the need for alternative ways of doing business. In the European Union, economists and institutions have begun to look back at industrial policies to implement a new way of doing business based on economic and social sustainable development, which is one of the founding principles of the European Union. This being the context, this paper discusses financial reporting regulation within the uniqueness of the EU institutional context and examines the consistency of IFRS adoption with the EU societal objectives. Specifically, the paper examines IFRS capability to support economic and social sustainable development. In doing this, not only does it provide regulators with a post-implementation overall assessment of IFRS adoption in the European Union but also with some guidance for future endorsement.

Corporate Ownership and Control

In capital markets, the investment decision-making process is vastly influenced by accounting inf... more In capital markets, the investment decision-making process is vastly influenced by accounting information. This paper addresses equity investment valuation through market multiples and its consequences in investors’ financial statements under fair value accounting principles. After replicating the valuation process through the most used market multiples (price-to-forecasted earnings; market-to-book; enterprise-value-to-performance indicators), the authors analyze the distribution of the estimated-to-actual fair value ratio under the IFRS 13 perspective and the effects of a randomly selected portfolio on the balance sheet and income statement of the investor. The study’s primary findings are that the market multiples tend to produce consistent results in 7 (at least) to 20 (at best) out of 100 cases, and over or underestimate the fair value in all the remaining cases without any apparent or predictable reason. The results of the paper confirm what previous literature underlined by st...

Financial Reporting under IAS/IFRS

The European Regulation 1606/2002 has required European firms listed on the European stock market... more The European Regulation 1606/2002 has required European firms listed on the European stock markets to prepare, starting from 2005, their consolidated financial statements according to the international accounting standards IAS/IFRS. The purpose of such a regulation is to ensure a high degree of transparency and comparability of financial statements and, hence, an efficient functioning of the European capital market.This paper investigates whether such a purpose can be considered as reached by focusing on the firms' cost of capital. It shows that early evidence documents beneficial effects from the IAS/IFRS adoption, even though such effects vary due to differences still persisting in the European countries' institutional frameworks and firms' incentives. The paper also makes some suggestions for future research and policy-making discussion. Résumé. Le Règlement européen 1606/2002 a obligé les entreprises cotées sur les marchés boursiers européens à préparer, à partir de 2005, leurs états financiers consolidés selon les normes comptables internationales IAS/IFRS. L'objectif d'un tel règlement est d'assurer un degré élevé de transparence et de comparabilité des états financiers et, par conséquent, un fonctionnement plus efficace du marché européen des capitaux. Cet article cherche à déterminer si un tel objectif peut être considéré comme atteint en se concentrant sur le coût du capital des entreprises. Il montre que la recherche empirique documente des effets bénéfiques de l'adoption des IAS/IFRS, même si ces effets varient en raison des différences qui subsistent en termes d'incitations des entreprises et dans les cadres institutionnels des pays européens. Cet article fait aussi des suggestions pour les recherches futures et la discussion sur l'élaboration des décisions politiques.

History of Accounting eJournal, 2015

Financial reporting is a powerful practice that shapes social and economic processes. This paper ... more Financial reporting is a powerful practice that shapes social and economic processes. This paper argues that there are fundamental reasons against current attempts to establish a single set of global financial reporting standards, moreover tailored to the needs of stock market-based capitalism.Evidence shows that there exists more than one way of doing business. Social market economy, for instance, is one of the founding principles of the European Union. Standardizing financial reporting onto a single economic model could therefore harm alternative forms of capitalism. It is at time of great uncertainty and change that the advantages of variety can be appreciated. Consistent with this view, this paper claims that the optimal design of financial reporting regulation should depend on the specific institutional characteristics of the economic and political systems.

Banking & Insurance eJournal, 2016

The effects of disclosure level on the cost of equity are a matter of considerable interest and i... more The effects of disclosure level on the cost of equity are a matter of considerable interest and importance to the financial reporting community. Economic theory indeed claims that commitment to increased level of disclosure reduces the cost of capital component that arises from information asymmetries. Accordingly, this paper investigates the effects of IFRS adoption in Europe on the cost of equity for the bank industry. In doing so, it performs an event study, which isolates the effects of accounting changes on the cost of capital from institutional and enforcement mechanisms. <br><br>This study shows that IFRS adoption has exerted, on average, a positive effect on the cost of capital for the bank industry at least in the very short run. Firms adopting IFRS seem to have experienced a lower cost of equity in the period immediately subsequent the release of financial reporting according to the new accounting standard set.

In response to increasing concerns by stakeholders, there has been a trend for many public corpor... more In response to increasing concerns by stakeholders, there has been a trend for many public corporations in recent years to provide more information on environmental matters within the annual report. Moreover, the increasing public awareness of environmental issues has put pressure on corporations to measure environmental costs and expenses and to develop an adequate management accounting and control system. The main purpose of this paper is that of identifying a conceptual framework which can be used to investigate the relationship between strategic responses to environmental issues and control system design and techniques.This conceptual framework should help answer questions as: what kind of environmental strategies do Italian ecological-risk sensitive firms adopt? How do the selected environmental strategies influence the control system characteristics? What kind of accounting and control techniques do firms implement in order to cope with environmental issues?

How to cite this paper: Migliavacca, A., Rainero, C., & Palea, V. (2021). Accounting for equity i... more How to cite this paper: Migliavacca, A., Rainero, C., & Palea, V. (2021). Accounting for equity investments under IFRS 13: Are market multiple evaluations accurate? Corporate Ownership & Control, 18(4),

Social Science Research Network, 2006

The effect of disclosure level on the cost of equity is a matter of considerable interest and imp... more The effect of disclosure level on the cost of equity is a matter of considerable interest and importance to the financial reporting community. In this research, I examined the effects of the IAS/IFRS adoption in Europe on the cost of equity capital relative to the bank industry. Previous research has shown that the adoption of the IAS/IFRS reduces information asymmetry between investors and firms. Economic theory claims that a commitment to increased level of disclosure reduces the cost of capital component that arises from information asymmetries. This study shows empirically that the increase in the level of disclosure provided by the IAS/IFRS leads effectively to a lower cost of capital. From a practical point of view, these findings provide evidence that the Regulator’s purpose of fostering a cost-efficient functioning of the capital market for firms could be considered as reached. Furthermore, they point out that firms which implemented the IAS/IFRS have gained a comparative ad...

Mutual Funds, 2016

In spite of their widespread use in practice, accounting-based multiples are subject of few acade... more In spite of their widespread use in practice, accounting-based multiples are subject of few academic studies. This paper investigates market and transaction multiples’ accuracy in corporate equity valuation by considering a sample of listed companies which are assumed to be private and evaluated according to accounting-based multiples. Since equity valuation is particularly challenging under stressed conditions, it focuses on the core period of the recent financial crisis. Results show that transaction and market multiples perform very poorly at least during financial turmoil, i.e. under the most uncertain information condition, and those relevant firm specific adjustments are necessary. Specifically, equity valuation based on multiples entails measurement errors which tend to overestimate fundamental values and to lead to more results that are volatile.

Accounting, Economics, and Law: A Convivium

Karthik Ramanna in ‘Unreliable accounts: How regulators fabricate conceptual narratives to diffus... more Karthik Ramanna in ‘Unreliable accounts: How regulators fabricate conceptual narratives to diffuse criticism’ considers how the Financial Accounting Standards Board (FASB) justified a conjunctural break from historic cost accounting (HCA) to Fair Value Accounting (FVA). Karthik’s paper explores how the US Financial Accounting Standards Board (FASB) legitimized the introduction of fair value accounting (FVA). This fundamental reorientation of financial reporting practice can, he argues, be understood within a framing device: conceptual veiling. Firstly, the FASB is (suspected to be) captured by the interests of investors and capital market actors. Secondly, the FASB needed to construct new narratives to enable this reorientation in accounting practice and this was achieved with changes to the governing conceptual framework. An alternative framing device is offered in this review, that of the financialization of company financial reporting and implications for company viability as opp...

“Whither Accounting Research?” is the question raised by Hopwood (2007) in an essay documenting a... more “Whither Accounting Research?” is the question raised by Hopwood (2007) in an essay documenting a growing sense of unease about the state and direction of accounting research. A number of critical studies have highlighted a detrimental tendency in academia, that is the excessive spread of performance measurement practices and the flow of superficiality and conformity they consolidate (e.g. Gendron, 2008; Gendron 2015; Parker, 2011; Pelger and Grottke, 2015). Too much intellectual inquiry operates within academic parameters that have limited the development of research relevant to society. The purpose of this paper is to discuss the causes that have led to research stagnation and to propose some remedies with a specific focus on the European Union. In tackling these issues, this paper presents a view of research that is strongly embedded in the social, political and economic context in which accounting operates.

The effect of disclosure level on the cost of equity is a matter of considerable interest and imp... more The effect of disclosure level on the cost of equity is a matter of considerable interest and importance to the financial reporting community. In this research, the effects of the IAS/IFRS adoption in Europe on the cost of equity capital relative to the bank industry have been examined. Previous research has shown that the adoption of the IAS/IFRS reduces information asymmetry between investors and firms. Economic theory claims that a commitment to increased level of disclosure reduces the cost of capital component that arises from information asymmetries. This study shows empirically that the increase in the level of disclosure provided by the adoption of the IAS/IFRS in the European Union by Regulation 1606/2002 has led effectively to a lower cost of capital. From a practical point of view, these findings provide evidence that the Regulator's purpose of fostering a cost-efficient functioning of the capital market for firms could be considered as accomplished. Furthermore, they...

Journal of Cleaner Production, 2022

The worldwide recession caused by the financial market crisis has raised widespread criticism on ... more The worldwide recession caused by the financial market crisis has raised widespread criticism on free stock market-based capitalism, highlighting the need for alternative ways of doing business. In the European Union, economists and institutions have begun to look back at industrial policies to implement a new way of doing business based on economic and social sustainable development, which is one of the founding principles of the European Union. This being the context, this paper discusses financial reporting regulation within the uniqueness of the EU institutional context and examines the consistency of IFRS adoption with the EU societal objectives. Specifically, the paper examines IFRS capability to support economic and social sustainable development. In doing this, not only does it provide regulators with a post-implementation overall assessment of IFRS adoption in the European Union but also with some guidance for future endorsement.

Corporate Ownership and Control

In capital markets, the investment decision-making process is vastly influenced by accounting inf... more In capital markets, the investment decision-making process is vastly influenced by accounting information. This paper addresses equity investment valuation through market multiples and its consequences in investors’ financial statements under fair value accounting principles. After replicating the valuation process through the most used market multiples (price-to-forecasted earnings; market-to-book; enterprise-value-to-performance indicators), the authors analyze the distribution of the estimated-to-actual fair value ratio under the IFRS 13 perspective and the effects of a randomly selected portfolio on the balance sheet and income statement of the investor. The study’s primary findings are that the market multiples tend to produce consistent results in 7 (at least) to 20 (at best) out of 100 cases, and over or underestimate the fair value in all the remaining cases without any apparent or predictable reason. The results of the paper confirm what previous literature underlined by st...

Financial Reporting under IAS/IFRS

The European Regulation 1606/2002 has required European firms listed on the European stock market... more The European Regulation 1606/2002 has required European firms listed on the European stock markets to prepare, starting from 2005, their consolidated financial statements according to the international accounting standards IAS/IFRS. The purpose of such a regulation is to ensure a high degree of transparency and comparability of financial statements and, hence, an efficient functioning of the European capital market.This paper investigates whether such a purpose can be considered as reached by focusing on the firms' cost of capital. It shows that early evidence documents beneficial effects from the IAS/IFRS adoption, even though such effects vary due to differences still persisting in the European countries' institutional frameworks and firms' incentives. The paper also makes some suggestions for future research and policy-making discussion. Résumé. Le Règlement européen 1606/2002 a obligé les entreprises cotées sur les marchés boursiers européens à préparer, à partir de 2005, leurs états financiers consolidés selon les normes comptables internationales IAS/IFRS. L'objectif d'un tel règlement est d'assurer un degré élevé de transparence et de comparabilité des états financiers et, par conséquent, un fonctionnement plus efficace du marché européen des capitaux. Cet article cherche à déterminer si un tel objectif peut être considéré comme atteint en se concentrant sur le coût du capital des entreprises. Il montre que la recherche empirique documente des effets bénéfiques de l'adoption des IAS/IFRS, même si ces effets varient en raison des différences qui subsistent en termes d'incitations des entreprises et dans les cadres institutionnels des pays européens. Cet article fait aussi des suggestions pour les recherches futures et la discussion sur l'élaboration des décisions politiques.

History of Accounting eJournal, 2015

Financial reporting is a powerful practice that shapes social and economic processes. This paper ... more Financial reporting is a powerful practice that shapes social and economic processes. This paper argues that there are fundamental reasons against current attempts to establish a single set of global financial reporting standards, moreover tailored to the needs of stock market-based capitalism.Evidence shows that there exists more than one way of doing business. Social market economy, for instance, is one of the founding principles of the European Union. Standardizing financial reporting onto a single economic model could therefore harm alternative forms of capitalism. It is at time of great uncertainty and change that the advantages of variety can be appreciated. Consistent with this view, this paper claims that the optimal design of financial reporting regulation should depend on the specific institutional characteristics of the economic and political systems.

Banking & Insurance eJournal, 2016

The effects of disclosure level on the cost of equity are a matter of considerable interest and i... more The effects of disclosure level on the cost of equity are a matter of considerable interest and importance to the financial reporting community. Economic theory indeed claims that commitment to increased level of disclosure reduces the cost of capital component that arises from information asymmetries. Accordingly, this paper investigates the effects of IFRS adoption in Europe on the cost of equity for the bank industry. In doing so, it performs an event study, which isolates the effects of accounting changes on the cost of capital from institutional and enforcement mechanisms. <br><br>This study shows that IFRS adoption has exerted, on average, a positive effect on the cost of capital for the bank industry at least in the very short run. Firms adopting IFRS seem to have experienced a lower cost of equity in the period immediately subsequent the release of financial reporting according to the new accounting standard set.

In response to increasing concerns by stakeholders, there has been a trend for many public corpor... more In response to increasing concerns by stakeholders, there has been a trend for many public corporations in recent years to provide more information on environmental matters within the annual report. Moreover, the increasing public awareness of environmental issues has put pressure on corporations to measure environmental costs and expenses and to develop an adequate management accounting and control system. The main purpose of this paper is that of identifying a conceptual framework which can be used to investigate the relationship between strategic responses to environmental issues and control system design and techniques.This conceptual framework should help answer questions as: what kind of environmental strategies do Italian ecological-risk sensitive firms adopt? How do the selected environmental strategies influence the control system characteristics? What kind of accounting and control techniques do firms implement in order to cope with environmental issues?

How to cite this paper: Migliavacca, A., Rainero, C., & Palea, V. (2021). Accounting for equity i... more How to cite this paper: Migliavacca, A., Rainero, C., & Palea, V. (2021). Accounting for equity investments under IFRS 13: Are market multiple evaluations accurate? Corporate Ownership & Control, 18(4),

Social Science Research Network, 2006

The effect of disclosure level on the cost of equity is a matter of considerable interest and imp... more The effect of disclosure level on the cost of equity is a matter of considerable interest and importance to the financial reporting community. In this research, I examined the effects of the IAS/IFRS adoption in Europe on the cost of equity capital relative to the bank industry. Previous research has shown that the adoption of the IAS/IFRS reduces information asymmetry between investors and firms. Economic theory claims that a commitment to increased level of disclosure reduces the cost of capital component that arises from information asymmetries. This study shows empirically that the increase in the level of disclosure provided by the IAS/IFRS leads effectively to a lower cost of capital. From a practical point of view, these findings provide evidence that the Regulator’s purpose of fostering a cost-efficient functioning of the capital market for firms could be considered as reached. Furthermore, they point out that firms which implemented the IAS/IFRS have gained a comparative ad...

Mutual Funds, 2016

In spite of their widespread use in practice, accounting-based multiples are subject of few acade... more In spite of their widespread use in practice, accounting-based multiples are subject of few academic studies. This paper investigates market and transaction multiples’ accuracy in corporate equity valuation by considering a sample of listed companies which are assumed to be private and evaluated according to accounting-based multiples. Since equity valuation is particularly challenging under stressed conditions, it focuses on the core period of the recent financial crisis. Results show that transaction and market multiples perform very poorly at least during financial turmoil, i.e. under the most uncertain information condition, and those relevant firm specific adjustments are necessary. Specifically, equity valuation based on multiples entails measurement errors which tend to overestimate fundamental values and to lead to more results that are volatile.

Accounting, Economics, and Law: A Convivium

Karthik Ramanna in ‘Unreliable accounts: How regulators fabricate conceptual narratives to diffus... more Karthik Ramanna in ‘Unreliable accounts: How regulators fabricate conceptual narratives to diffuse criticism’ considers how the Financial Accounting Standards Board (FASB) justified a conjunctural break from historic cost accounting (HCA) to Fair Value Accounting (FVA). Karthik’s paper explores how the US Financial Accounting Standards Board (FASB) legitimized the introduction of fair value accounting (FVA). This fundamental reorientation of financial reporting practice can, he argues, be understood within a framing device: conceptual veiling. Firstly, the FASB is (suspected to be) captured by the interests of investors and capital market actors. Secondly, the FASB needed to construct new narratives to enable this reorientation in accounting practice and this was achieved with changes to the governing conceptual framework. An alternative framing device is offered in this review, that of the financialization of company financial reporting and implications for company viability as opp...

“Whither Accounting Research?” is the question raised by Hopwood (2007) in an essay documenting a... more “Whither Accounting Research?” is the question raised by Hopwood (2007) in an essay documenting a growing sense of unease about the state and direction of accounting research. A number of critical studies have highlighted a detrimental tendency in academia, that is the excessive spread of performance measurement practices and the flow of superficiality and conformity they consolidate (e.g. Gendron, 2008; Gendron 2015; Parker, 2011; Pelger and Grottke, 2015). Too much intellectual inquiry operates within academic parameters that have limited the development of research relevant to society. The purpose of this paper is to discuss the causes that have led to research stagnation and to propose some remedies with a specific focus on the European Union. In tackling these issues, this paper presents a view of research that is strongly embedded in the social, political and economic context in which accounting operates.

The effect of disclosure level on the cost of equity is a matter of considerable interest and imp... more The effect of disclosure level on the cost of equity is a matter of considerable interest and importance to the financial reporting community. In this research, the effects of the IAS/IFRS adoption in Europe on the cost of equity capital relative to the bank industry have been examined. Previous research has shown that the adoption of the IAS/IFRS reduces information asymmetry between investors and firms. Economic theory claims that a commitment to increased level of disclosure reduces the cost of capital component that arises from information asymmetries. This study shows empirically that the increase in the level of disclosure provided by the adoption of the IAS/IFRS in the European Union by Regulation 1606/2002 has led effectively to a lower cost of capital. From a practical point of view, these findings provide evidence that the Regulator's purpose of fostering a cost-efficient functioning of the capital market for firms could be considered as accomplished. Furthermore, they...