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John R. M. Hand - One of the best experts on this subject based on the ideXlab platform.
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the value relevance of Financial Statements in the venture capital market
The Accounting Review, 2005Co-Authors: John R. M. HandAbstract:This study examines the value relevance of Financial statement data and nonFinancial statement information within and across the pre‐IPO venture capital and post‐IPO public equity markets. For a sample of U.S. biotechnology firms, I find that Financial Statements are highly value‐relevant in the venture capital market, and that the signs of the associations between equity values and Financial statement data in that market are similar to those in the public equity market, despite significant structural differences between the two. I also find that the value relevance of Financial Statements generally increases as firms mature, consistent with Financial Statements capturing the increasing intensity of assets‐in‐place relative to future investment options. In contrast, the value relevance of nonFinancial statement information decreases as firms mature, indicating that, in a dynamic sense, Financial Statements and nonFinancial statement information of venture‐backed pre‐IPO biotech companies are information s...
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the value relevance of Financial Statements in the venture capital market
Social Science Research Network, 2004Co-Authors: John R. M. HandAbstract:Financial Statements are value relevant in public equity markets; this study explores the value relevance of Financial Statements in private equity markets, especially venture capital markets. Specifically, it investigates the value relevance of Financial statement data and non-Financial statement information for the pre-initial public offering (IPO) venture capital market and the post-IPO public equity market. Argues that despite differences between the two markets, commonalities underlying firm economics and generally agreed accounting principles (GAAP) combine to form predictable relations between equity values, Financial statement data, and nonFinancial statement information. Data on venture capital firm valuation for a total sample of 204 biotechnology firms was obtained from Recombinant Capital, covering 1992-2003. NonFinancial information was compiled from a variety of sources. Analysis found that in the venture capital market, Financial Statements are highly value-relevant. The signs/signals of the associations between equity values and Financial statement data in the venture capital market are similar to those in the public equity market, even though there are structural differences between them. Also found that as firms mature, the value relevance of Financial Statements increases; this increase is consistent with the fact that Financial Statements capture the increasing intensity of assets-in-place relative to future investment options.In contrast, as firms mature, the value relevance of non-Financial statement information decreases; this decrease indicates that Financial Statements and nonFinancial statement information of pre-IPO biotech companies backed by venture capital are information substitutes in valuation, not complements. (TNM)
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The Value Relevance of Financial Statements in Private Equity Markets
SSRN Electronic Journal, 2003Co-Authors: John R. M. HandAbstract:This study explores the value relevance of Financial Statements in private equity markets, and compares the value relevance of Financial Statements to that of non-Financial statement information within and across private and public equity markets. For a sample of U.S. biotechnology firms, I find that Financial Statements are highly value relevant in private equity markets, and that the signs of the associations between equity values and Financial statement data are similar to those in public equity markets, despite significant structural differences between the two markets. I also find that the value relevance of Financial Statements increases as firms mature, which I attribute to Financial Statements capturing the increasing intensity of assets in place relative to future investment options as firms mature. I also observe that the value relevance of non-Financial statement information decreases as firms mature. In a dynamic sense, Financial Statements and non-Financial statement information of biotech companies are information substitutes in valuation, not complements.
Ignacio Velez-pareja - One of the best experts on this subject based on the ideXlab platform.
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Forecasting Financial Statements with No Plugs and No Circularity
The IUP Journal of Accounting Research and Audit Practices, 2011Co-Authors: Ignacio Velez-parejaAbstract:Textbooks on corporate finance and budgeting and forecasting recommend ‘closing’ the Financial Statements using what is known as a plug. A plug is a formula to match the Balance Sheet (BS) using differences in some items listed in it in such a way that the accounting equation holds. This is risky because certain numbers in the Financial Statements could be in error and still the plug would indicate that everything is correct. This paper shows how to construct Financial statement without plugs and circularity. It explains how the plug works and what are its drawbacks. It presents a detailed example that can be used by any student, teacher or practitioner to properly construct consistent Financial Statements. The example shows how to relate different cells in the spreadsheet. Some criticisms against the no plug, no circularity approach are also presented and discussed. Finally, the paper suggests that the use of plugs should be discontinued while teaching forecasting Financial Statements and budgeting.
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Forecasting Financial Statements (Slides)
Research Papers in Economics, 2010Co-Authors: Ignacio Velez-parejaAbstract:This is a course material (slides in pdf format) from the book 'Investment Decision Making For Firm and Project Valuation.' The book is originally in Spanish and is untitled as 'Decisiones de inversion. Para la valoracion financiera de proyectos y empresas.' Chapter 5 deals with how to prepare and use information to make forecasts to be used in forecasting Financial Statements. In this chapter we show step by step how to proceed to make proper forecasts in order to have the future Financial Statements. In Chapter 6 we deal with the construction of the forecasted Financial Statements based on the tables calculated in Chapter 5.
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Guidelines for Forecasting Financial Statements from Historical Financial Statements for Valuation Purposes (Updated)
SSRN Electronic Journal, 2009Co-Authors: Ignacio Velez-parejaAbstract:In this teaching note I list some suggestions that might be useful to take into account when forecasting Financial Statements departing from historical data. The ideas presented in this note are the result of advising undergraduate and graduate students in the course Econ 195.96/295.96 (Crosslisted: PubPol 264.96): Cash Flow Valuation (CFV): A Basic Introduction to an Integrated Market-Based Approach at Duke University during the Fall of 2005 and my previous experience of teaching the subject at Politecnico Grancolombiano in Bogota, and other universities in Colombia.The note is divided in four sections: Section One, Analyzing the Historical Financial Statements, is related to the analysis and use of historical information from the Financial Statements. In Section Two I mention some tips related to the construction of forecasted Financial Statements. In Section Three I present a list of tips related to the proper way to valuate the cash flows. In Section Four a brief summary is presented.
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Forecasting Financial Statements with No plugs and No Circularity
Social Science Research Network, 2007Co-Authors: Ignacio Velez-parejaAbstract:Typical textbooks on corporate finance and forecasting and budgeting recommend "closing" and matching the Financial Statements using what is known as a plug. A plug is a formula to match the Balance Sheet using differences in some items listed in it in such a way that the accounting equation holds. This is a very easy way to do it but it encompasses some risks. The risks are that certain numbers in the Financial Statements could be in error and still the plug would indicate that everything is correct because the Balance Sheet matches.In this work we show how to construct Financial statement without plugs and circularity. The basic learning objective of this work is to develop the students' and practitioners' abilities for constructing a proper Financial model to forecast Financial Statements without plugs and without circularity.We explain how the plug works and which its drawbacks are. We present a detailed example that can be used by any student, teacher or practitioner to properly construct consistent Financial Statements. The example shows how to relate different cells in the spreadsheet and the reader is encouraged to develop the example by herself.We present some criticisms received against the no plug, no circularity approach and we discuss them. Finally, as a conclusion we suggest that the use of plugs should be discontinued when teaching forecasting Financial Statements and budgeting.
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Basic review of Financial Statements and accounting concepts
Principles of Cash Flow Valuation, 2004Co-Authors: Joseph Tham, Ignacio Velez-parejaAbstract:This chapter presents cash flow valuation, through a favor integrated approach that links the nominal Financial Statements in a consistent manner, and relies on the strengths and perspectives of the different Financial Statements to inform and improve the valuation exercise. The integration of the Financial Statements facilitates the sensitivity analysis that one can conduct on the key parameters of the model and provide an internally consistent validity check on the construction of the Financial Statements. Some basic principles for constructing document of Financial Statements (namely the income statement), the BS, and the cash flow statement (CFS) according to generally accepted accounting principles (GAAP), which are required for the valuation framework. In addition, the chapter discusses the construction of the CB Statements, common Financial Statements, and basic accounting concepts that are used in accounting. Preliminary tables and calculations that are completed prior to the construction of the three Financial Statements and the basic accounting concepts are also explained.
Yannis Manolopoulos - One of the best experts on this subject based on the ideXlab platform.
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Data Mining techniques for the detection of fraudulent Financial Statements
Expert Systems with Applications, 2007Co-Authors: Efstathios Kirkos, Charalambos Spathis, Yannis ManolopoulosAbstract:This paper explores the effectiveness of Data Mining (DM) classification techniques in detecting firms that issue fraudulent Financial Statements (FFS) and deals with the identification of factors associated to FFS. In accomplishing the task of management fraud detection, auditors could be facilitated in their work by using Data Mining techniques. This study investigates the usefulness of Decision Trees, Neural Networks and Bayesian Belief Networks in the identification of fraudulent Financial Statements. The input vector is composed of ratios derived from Financial Statements. The three models are compared in terms of their performances.
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Detection of Fraudulent Financial Statements through the use of Data Mining Techniques
2005Co-Authors: Efstathios Kirkos, Charalambos Spathis, Yannis ManolopoulosAbstract:This paper explores the effectiveness of Data Mining (DM) classification techniques in detecting firms that issue fraudulent Financial Statements (FFS) and deals with the identification of factors associated to FFS. In accomplishing the task of management fraud detection, auditors could be facilitated in their work by using data mining techniques. This study investigates the usefulness of Decision Trees, Neural Networks and Bayesian Belief Networks in the identification of fraudulent Financial Statements. The input vector is composed of ratios derived from Financial Statements. The three models are compared in terms of their performances. The results identify the model with the best accuracy rate and highlight the importance of variables in fraudulent Financial statement detection. They also indicate that the investigation of Financial information can be of use in the identification of FFS and underline the importance of Financial ratios.
Teri Lombardi Yohn - One of the best experts on this subject based on the ideXlab platform.
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the demand for Financial Statements in an unregulated environment an examination of the production and use of Financial Statements by privately held small businesses
The Accounting Review, 2009Co-Authors: Kristian D Allee, Teri Lombardi YohnAbstract:ABSTRACT: We examine the Financial reporting practices of small privately held businesses that are not subject to SEC regulation. Specifically, we determine the factors associated with the production and use of Financial Statements for firms that have discretion in the preparation of Financial Statements and do not face the demands of public equity markets. In addition, for firms that prepare Financial Statements, we determine the factors associated with the sophistication of the Financial Statements in terms of whether the Financials are compiled, reviewed, and/or audited by a professional accountant and whether the firm produces accrual‐based Financial Statements. Finally, we examine the potential benefits afforded firms producing Financial Statements, having audited Financial Statements, and having accrual‐based Financial Statements. We find that firms with audited Financial Statements benefit in the form of greater access to credit and that firms with accrual‐based Financial Statements benefit in the ...
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The Demand for Financial Statements in an Unregulated Environment: an Examination of the Production and Use of Financial Statements By Privately-Held Small Businesses
SSRN Electronic Journal, 2007Co-Authors: Kristian D Allee, Teri Lombardi YohnAbstract:We examine the Financial reporting practices of small privately-held businesses that are not subject to SEC regulation. Specifically, we determine the factors associated with the production and use of Financial Statements for firms who have discretion in the preparation of Financial Statements and who do not face the demands of public equity markets. In addition, for firms that prepare Financial Statements, we determine the factors associated with the sophistication of the Financial Statements in terms of whether the Financials are compiled, reviewed, and/or audited by a professional accountant and whether the firm produces accrual-based Financial Statements. Finally, we examine the potential benefits afforded firms producing Financial Statements, having audited Financial Statements, and having accrual-based Financial Statements. We find that firms with audited Financial Statements benefit in the form of greater access to credit and that firms with accrual-based Financial Statements benefit in the form of a lower cost of credit.
Efstathios Kirkos - One of the best experts on this subject based on the ideXlab platform.
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Data Mining techniques for the detection of fraudulent Financial Statements
Expert Systems with Applications, 2007Co-Authors: Efstathios Kirkos, Charalambos Spathis, Yannis ManolopoulosAbstract:This paper explores the effectiveness of Data Mining (DM) classification techniques in detecting firms that issue fraudulent Financial Statements (FFS) and deals with the identification of factors associated to FFS. In accomplishing the task of management fraud detection, auditors could be facilitated in their work by using Data Mining techniques. This study investigates the usefulness of Decision Trees, Neural Networks and Bayesian Belief Networks in the identification of fraudulent Financial Statements. The input vector is composed of ratios derived from Financial Statements. The three models are compared in terms of their performances.
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Detection of Fraudulent Financial Statements through the use of Data Mining Techniques
2005Co-Authors: Efstathios Kirkos, Charalambos Spathis, Yannis ManolopoulosAbstract:This paper explores the effectiveness of Data Mining (DM) classification techniques in detecting firms that issue fraudulent Financial Statements (FFS) and deals with the identification of factors associated to FFS. In accomplishing the task of management fraud detection, auditors could be facilitated in their work by using data mining techniques. This study investigates the usefulness of Decision Trees, Neural Networks and Bayesian Belief Networks in the identification of fraudulent Financial Statements. The input vector is composed of ratios derived from Financial Statements. The three models are compared in terms of their performances. The results identify the model with the best accuracy rate and highlight the importance of variables in fraudulent Financial statement detection. They also indicate that the investigation of Financial information can be of use in the identification of FFS and underline the importance of Financial ratios.
