Vol 15, No 1 (2021)

The purpose of this paper is to identify key indicators of corporate governance that affect the market value of Russian companies. To this end, we examine the possibility of modifying the Ohlson model of evaluating stock price dynamics in public companies, by adding corporate governance variables that may affect market value.

The study consists of the following stages: the key points of the Ohlson economic model are described, empirical works that demonstrate corporate governance as a factor in assessing the value of companies are presented, and the significance of the modified Ohlson model for the Russian market is evaluated.

The novelty of our methodology is represented in the prioritisation of our “other information” parameter, which is a combination of forecast analytical data and corporate governance indicators. Through analysis of panel data, we estimate differences in the predicted net profit indicator, calculated as the average of analyst forecasts for an individual company for a financial year, and the actual net profit. Corporate governance is represented by the percentage of board members holding professional certificates and licenses, the average term of board of directors members, the share of independent members on the board of directors, the share of independent members in the audit committee, the proportion of women on the board of directors, and the size of the board of directors.

Our results indicate dependence of share prices on the dynamics of the book value of equity, abnormal profits, the share of board members holding professional qualifications, the difference between the actual net profit and the forecast net profit of companies, and the level of gender diversification in the board of directors. The results of our analysis of deviations in average stock prices are comparable to the findings of existing literature examining the markets of Europe, Latin America and Africa.

The objective of this paper is to define the theoretical basis and clarify the fundamental concept of the Conceptual Framework for Financial Reporting (CFFR). This is because the theoretical basis for CFFR has not been properly defined, and the articulation of the fundamental concept in the document does not correspond to its actual meaning. In clarifying, we will analyse these attributes from a critical perspective and propose an alternative articulation.

We apply a research method widely used in the USA based on semiotics, which construes accounting as a business language and requires analysis of the key accounting concepts from three viewpoints: syntactic, semantic an pragmatic. Two different theories form the theoretical basis for CFFR: the organisation theory and the residual equity theory. We further propose that the articulation of the fundamental concept of “objective of financial reporting” is self-contradictory, which is aggravated by the fact that the document deals with users of financial reporting and their objectives.

We identify major drawbacks in both theories. The organisation theory requires specific financial reporting which is incompatible with standardisation, and the residual equity theory is extremely difficult to understand and is not completely satisfactory for any of its user groups. These drawbacks and inaccuracies occlude understanding of CFFR and financial reporting.
As a result, we propose that it is advisable to do the following when developing the next version of CFFR:

• define the uniform theoretical basis in CFFR clearly;
• use the proprietary theory as the uniform theoretical basis;
• the definition of financial reporting oriented to informational needs of company owners should be the fundamental concept of CFFR.

This will enable CFFR and financial reporting to be simpler understand and the primary needs of all user groups will be satisfied.

This paper examines the risk adjusted discount rate (RADR) method for evaluating risky nonconventional projects, which has been hotly debated over the last century [1]. Economists face the contradiction of using the NPV rule to evaluate projects with different levels of risk. According to the theory of investments, the higher the project risk, the greater the return for the investor. Therefore, an increased discount rate is used to evaluate a riskier project, as a result, the project’s NPV decreases and the project is deemed less attractive or even unprofitable for investment. However, the NPV of a nonconventional investment project may increase through increasing the discount rate, and then the investor, following the NPV rule, will choose a riskier project out of two projects with the same yield. That does not correspond to the hypothesis about rational investor behavior.

We continue the study of the RADR method. Recently, published works [2–4] have proposed a solution to the debatable RADR problem. The GNPV method was used for evaluating risky nonconventional projects. We will evaluate these aspects of the recent literature. We examine the fallacy of the main arguments (to maintain value additivity and preclude arbitrage) justifying the application of a single rate to discount risky opposite sign cash flows. The future cash flows are estimated independently of the transactions preceding them, which seems illogical, so a risk penalty formula which adjusts the discount rate applied to risky negative cash flows is applied. The risk penalty is determined depending on the risk premium in the case of symmetric and asymmetric distribution of cash flow values.

Our results are applicable to a diverse range of business applications, including but not limited to well-known asset pricing models, short position analysis, determining fair insurance premiums, and calculating appropriate RADRs for public private partnerships.

Certain attributes of corporate governance behaviour have been identified in academic research as major factors correlating with corporate risk disclosure amongst listed companies. This is in spite of the fact, however, that much of the empirical research in the area reveals mixed results.

This study analyses corporate risk disclosure practice involving listed companies and investigates whether such diverse results are attributable to regulation, jurisdiction, operating industry, business environment, or the methodologies employed. We use risk disclosure, corporate governance and organisational characteristics keywords to search the relevant studies on which 46 empirical research papers were sampled, and employ a meta-analysis procedure to evaluate the findings of the previous empirical research.

Our analyses reveal that firm size is the major organisational-specific characteristic affected by moderators, and board size and institutional investors are the major corporate governance variables that affect moderators. On the analysis of the nature of disclosure, financial risk information is higher for companies operating in the banking sector, while operational risk disclosure is higher for non-financial companies. Additionally, the study finds that the data generating procedure, time interval, diversity of sample and size, and the statistical technique employed are among the major factors that influence discrepancies among the prior studies.

Such variables complicate stakeholders’ effort to comprehend the main factors that influence companies to unveil their risks profile. We propose that the current data collection process is labour intensive and time consuming, and promote the selection of smaller sample sizes compared to most of the existing research. It may be the case that constraints can be overcome through research that employs an automated procedure for analysis of textual data.