Influence of the investment properties measurement criterion on earnings persistence: a study with real estate exploitation companies listed in [B]³
Abstract
Objective: To analyze the influence of the accounting choice dependent for the criterion for measuring investment properties (PPI) on the earnings persistence of real estate exploitation companies listed in [B]³.
Method: The companies listed on [B]³ classified in the “Real Estate Exploration” segment and which had a balance in the “Investment Property” account were selected. The study period comprised 2010 to 2020, with annual information. As methodological procedures, a descriptive analysis of the data and an estimation by the Generalized Method of Moments (GMM) were carried out.
Originality/Relevance: No studies were found that compare PPI accounting choices and their impact on earnings persistence, especially in this line of business, which is highly representative of PPI in relation to its total assets and whose fair value is assessed by levels 2 or 3, which generate greater discretion. Thus, it becomes relevant to understand whether the choice of measurement criteria for this asset influences the persistence of these companies' earnings.
Results: The exploratory data analysis points to greater profitability for companies that use historical cost as a measurement criterion for PPI in relation to companies that adopt fair value. With regard to earnings persistence, it was observed that companies generally show persistent earnings over the period studied. However, a reduction in this persistence can be seen when checking only the companies that opted for the fair value for measuring PPI.
Theoretical/methodological/practical contributions: The study contributes to the discussion on the persistence of earnings in a scenario of faculty of accounting choice between historical cost and fair value for asset valuation. The results can help managers in choosing the measurement criteria, in addition to contributing to the understanding of the sustainability of the companies' net income.
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