THE ROLE OF NON-CONTROLLING INTERESTS IN THE VALUE RELEVANCE OF CONSOLIDATED FINANCIAL STATEMENTS

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Abstract

Based on a sample of European listed companies, the present study has investigated value relevance of consolidated financial statements prepared according to IASs/IFRSs and whether presence or absence of non-controlling interests is relevant to capital markets investors. Several previous studies deal with value relevance of consolidated annual reports, but none of them considered the influence of non-controlling interests on investor’s choices. To analyze if and how minority shareholders presence can affect investors’ choices, we have analyzed the value relevance of consolidated financial statements with minorities and, on the other side, annual reports from groups without non-controlling interests. To do it, we have used a valuation framework based on Ohlson theory and we have tested our hypothesis through an Ohlson derived price model. Findings provide evidence that consolidated financial statements prepared according to IASs/IFRSs are value-relevant. Moreover, contrary to expectations, financial information related to non-controlling interests is not so significant to investors’ choices.

Keywords: Value Relevance, Financial Statements, Consolidated Reporting, Accounting

Received: 29.09.2017

Accepted: 23.11.2017

How to cite this paper: Sotti, F. (2017). The role of non-controlling interests in the value relevance of consolidated financial statements. Corporate Ownership & Control, 15(1-2), 435-443. https://doi.org/10.22495/cocv15i1c2p12