Research
Mission Statement
The institute engages predominantly in empirical positive research within the field of financial accounting, auditing and corporate governance. In doing so, we address research which has potential to yield top level international scholary publications, while also having an impact on current practice.
Besides of engaging in scholary research we also publish teaching and practice related work in the area of international accounting. One prominent example of this field of work is the German language textbook "Internationale Rechnungslegung" which is co-authored by Rolf Uwe Fülbier, Bernhard Pellens and Joachim Gassen, supported by a group of scholars from different institutions and is widely accepted as one of the leading German language text books on international accounting.
Research Seminar
The institute's research seminar is a joint initiative of Humboldt-Universität zu Berlin and ESMT.
Publications
Research published by members of the institute.
Projects:
The Role of Auditing in the German Capital Market
This research program is joint work of Joachim Gassen with Holly Ashbaugh-Skaife from University of Wisconsin-Madison. We investigate the impact of the KonTraG related rule changes on the monitoring role of the auditing process of German public firms. Future work will question the reasons of the observed concentration process in the German audit market and will investigate the impact of client power on the German audit market.
Link to SSRN: Can Audit Reforms Enhance the Informational Role of Auditing? Evidence from the German Market. Forthcoming in: Contemporary Accounting Research, Vol. 26, No. 3, 2009.
Determinants and Consequences of IFRS accounting
Part of this project research program is joint work of Joachim Gassen with Thorsten Sellhorn from Ruhr University of Bochum. While the EU regulation imposes IFRS accounting on European public companies and a lot of private companies are adopting IFRS as well, relatively little is known about the consequences of IFRS reporting on e.g. earnings and disclosure quality, information asymmetry and cost of capital. We document a modest positive impact of voluntary IFRS accounting of German public firms on several aspects of earnings quality and information asymmetry. Future research will address whether these findings are robust across countries and post-2005 adopters.
Publication: Gassen, J. und T. Sellhorn (2006): Applying IFRS in Germany: Determinants and Consequences, in: Betriebswirtschaftliche Forschung und Praxis 58: 365-386.
Link to SSRN: Applying IFRS in Germany: Determinants and Consequences
Asset Pricing and Information Uncertainty
One of the fundamental aspects of asset prices is the inherent uncertainty in assessing the distributions of the assets’ future cash flows. While one stream of finance literature treats this uncertainty as estimation risk, and postulates that it is unsystematic and as such will be diversified away in equilibrium, another recent stream of research postulates that this uncertainty has a systematic component and thus influences asset prices. This discussion is relevant to capital market based accounting research because (a) it establishes a direct link between financial accounting and asset prices and (b) especially research on international accounting issues regularly assumes that stock prices are of comparable informational efficiency across markets. In order to tackle these issues, we first develop and test alternative metrics of stock price informativeness across countries. This research project is joined work with Hollis Ashbaugh-Skaife (UW-Madison) and Ryan LaFond (Massachusetts Institute of Technology). Future work will use these measures to investigate the link between information uncertainty and asset prices.
Link to SSRN: Does Stock Price Synchronicity Represent Firm-Specific Information? The international Evidence
Preferences and attitudes of retail investors
Surprisingly little is known about the attitudes and preferences of retail investors. In joint work with Edgar Ernst (CFO, Deutsche Post AG) and Bernhard Pellens (Ruhr University of Bochum) we surveyed the shareholders’ of Deutsche Post AG to shed some light on their incentives, behavior and attitudes towards topics in the area of information, dividend and corporate governance policies. Based on 80,000+ responses, we are able to construct a sample which we see as representative for German retail investors and develop a very distinctive picture of their attitudes. Also, we compare these findings with the results for a group of institutional investors. In future work we will compare the responses of investors across their countries of domicile to assess the impact of cultural origin on investors’ responses.
Accounting Conservatism
One of the few attributes of financial accounting which are shared across the broad set of international divergent accounting regimes is accounting conservatism: accountants tend to impose higher levels of verification before recognizing gains than they do before recognizing losses. However this concept of conservatism is difficult to measure empirically and its level varies across countries. In joint work with Rolf Uwe Fülblier (WHU Vallendar) and Thorsten Sellhorn (Ruhr University Bochum) Joachim Gassen documents that the international diverging levels of news-related conservatism can be explained by firm-specific factors, whereas a different earnings attribute, earnings smoothness, appears to be much more influenced by country level proxies of institutional infrastructure. Future work will describe the different empirical metrics of conservatism and will investigate their attributes across countries.
Link to SSRN: International Differences in Conditional Conservatism: The Role of Unconditional Conservatism and Income Smoothing
Publication: Gassen, J., R. U. Fülbier and T. Sellhorn (2006): International Differences in Conditional Conservatism: The Role of Unconditional Conservatism and Income Smoothing, in: European Accounting Review 14: 527-564.
Current work related to teaching and practical accounting issues:
Case Study on Foreign Currency Translation and Purchase Price Allocation under IAS 21
The translation of foreign currency financial statements in the process of consolidation is one of the most complicated steps in group accounting. Its general importance and the magnitude of the resulting adjustment accounts are triggered by the increasing number of internationally operating companies. IAS 21 allows the use of two alternative translation methods, both different in complexity and their effect on the balance sheet.
After giving a brief review of the framework of IAS 21, we apply case study methodology to investigate the impact of the different translation methods on the purchase price allocation process and on equity and income numbers.
Publication: Gassen, J., T. Davarcioglu, M. Fischkin and U. Küting (2007): Währungsumrechnung nach IFRS im Rahmen des Konzernabschlusses [foreign currency translation under IAS 21 for conolidated financial statements: A case study]. Kapitalmarktorientierte Rechnungslegung 7: 171-180.
Excel-File containing translation data and results.
German language text book on IFRS accounting (in seventh edition, 2008):
B. Pellens, R. U. Fülbier, J. Gassen and T. Sellhorn (2008): Internationale Rechnungslegung: IFRS/IAS mit Beispielen und Fallstudie [International Accounting], 7. Auflage, Stuttgart.
This text book is one of the leading German language text books on international accounting. We lay special emphasize on an economic and conceptual approach, detailed case based guidance and rigorous presentation of the institutional details.
