Title: Securitisation transactions, real manipulation and stock market valuation

Authors: Mohamed Chakib Kolsi; Hamadi Matoussi

Addresses: High Institute of Business Studies, University of Sfax, Route Sidi Mansour, Km 10, BP. 568, 3018, Sfax, Tunisia. ' High Institute of Accounting and Administration, University of Manouba, Campus Universitaire de la Manouba, 2010, Manouba, Tunisia

Abstract: Recent corporate financial scandals show that managers, financial intermediaries and financial statement users are unable to assess correctly the information disclosed in firms| annual reports. In this paper, we present empirical evidence consistent with the use of securitisation gains by managers for real manipulation of reported earnings. First, the estimation of the simultaneous equation approach using the seemingly unrelated regression (SURE) method (Zellner, 1962) shows that managers use discretionary accruals and securitisation gains as substitutes to manage their reported earnings. Additional analysis shows that securitisation gains are used for real smoothing purposes. Finally, the association between securitisation gains and the probability to issue a qualified opinion by the auditor indicates that auditors do not signal the negative consequences of extreme values of gains to outsiders through their opinion. Moreover, using panel data estimation, the value of the disclosed gains seems to be mispriced by investors as reflected in security returns.

Keywords: securitisation gains; discretionary accruals; real manipulation; firm value; stock market valuation; reported earnings; annual reports; financial disclosure; security returns; auditing.

DOI: 10.1504/IJAF.2011.043845

International Journal of Accounting and Finance, 2011 Vol.3 No.2, pp.147 - 164

Received: 30 Mar 2011
Accepted: 06 Jun 2011

Published online: 23 Nov 2011 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article