The panel was chaired by Professor Shyam Sunder (Yale University). Professor Colin Haslam (Queen Mary University of London) started by providing preliminary findings from the ELI SIG report on ‘Company capital management: Safeguarding financial resilience for corporate sustainability’. Evidence was provided that a significant proportion of companies in the US and EU has been exposed to aggressive practices of equity capital management, eroding their capacity to remain solvent, resilient and sustainable in the longer term.
Professor Vera Palea (University of Turin) argued for a more meaningful definition of long-term equity investments, drawing on the EU’s concerns that current international accounting standards may be inappropriate to pursue the United Nations Sustainable Development goals as well as achieve the targets of the Paris Agreement on climate change.
Dr Julia Morley (London School of Economics) provided an evidence-based analysis of the International Accounting Standards Board (IASB)’s standard-making process, showing how a few fair value advocates amidst its membership were was able to exert a disproportionate influence over discursive norms, defeating the due process intended to guarantee democratic decision-making.
Dr Matthew Sooy (Ivey Business School) presented experimental results showing that fair value accounting may lead to mispriced securities while encouraging speculative behaviour in financial market operations.
Professor Shyam Sunder contributed to the final discussion by recalling that the very label of ‘fair value’ is loaded with embedded and highly evocative value judgement relating it to fairness and social justice. Choice of such evocative labels has been an effective rhetorical device to direct policy outcomes towards pre-determined ends over history. The so-called fair value advocacy tries to derive accounting from the markets instead of providing accounting information for the markets to operate properly.
Dr Yuri Biondi (Centre national de la recherche scientifique, CNRS) added that such fundamental information should come from the business firm, not from the markets, contrary to the fair value accounting approach.
Altogether, the panellists shared the view that accounting numbers, rules and norms have a critical although neglected impact on corporate management, corporate governance and financial market price formation, involving important consequences and implications for business, economy and society.
More information can be found in the programme here.
