An investigation in forensic accounting: private company valuation and related components of forensic accounting

DiGabriele, James A. (2009) An investigation in forensic accounting: private company valuation and related components of forensic accounting. PhD thesis, Middlesex University.

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Abstract

This composition presents a digest of research that investigates aspects of forensic accounting that shape its development from practice to an academic research perspective. This submission is based on six outputs that cover the period of 2006 through 2008. My research theme is, in the context of valuations of privately held companies, identifying the skills of a forensic accountant, and how to use them. This research not only breaks ground in the growing field of forensic accounting as it applies to private company valuation, but also lays a firm foundation and gives direction for further research. It provides insights into a growing sector of accounting for which there is a pressing need due to a dearth of research in the area.

Statistically significant results of Output 1 indicate that there are systematic trends in court preferences for valuation methods, and provides empirical evidence of best valuation choices for decision makers involved in proposition of methods to the courts. Study controls indicated that macroeconomic factors such as GDP and inflation are related to court choice of valuation methods for some types of cases. Specifically, market methods are preferred during
higher economic growth and the capitalized earnings method is preferred during times of higher economic inflation.

Output 2 contributes to research by producing new knowledge with the understanding of the trend of investigating a potential insurance fraud in a routine business interruption.

Output 3 hypothesized that valuation approaches for closely held companies preferred by court vary by industry type. Income approaches were more popular that either asset or market approaches for manufacturing industries, and that the market approach had a higher proportion of cases than asset approach for holding companies. Significant results for logistic regression analyses indicated that income valuation approaches had odds ratios approximately five times greater for manufacturing companies than other types of companies, which substantiated the results from the univariate analyses.

Output 4 found a statistically significant odds ratio of 6.27 indicating the matrimonial court preferred the capitalized earning method when inflation was high and involved a manufacturing company. In addition, the excess earning method was far more likely to be preferred in marital dissolution when the case did not involve a service company.

Output 5 defined the relevant skills of forensic accountants, and the perceived importance of these skills among three important stakeholders; forensic accountants, accounting academics, and users of forensic accounting services. These empirical findings are the first of its kind.

Output 6 presented the results of a moderated multiple regression analysis to show that, all else held equal, there exists a positive premium in the relative valuation of S corporations over C corporations in the period subsequent to the Tax Court rulings that started this debate. The model also allows for the moderation of this premium by varying different levels of a set of interaction variables. The results of the study indicate that the magnitude of the "S corporation premium" depends on the level of these variables. My contribution to knowledge is presented in table format with the number of citations of each publication according to searches on Google Advanced Scholar, Lexis-Nexis, and a general World Wide Web search. In addition, since the World Wide Web has essentially created an environment where information is simply a point and a click away, the relevance of manuscript downloads are an important indicator of the interest and contribution of a paper. There are recorded downloads of my publications from various publishing sources either selling academic articles online or simply providing working papers available for download. Included in table 1 and table 2 are the aggregate number of downloads and source, respectively.

Item Type: Thesis (PhD)
Research Areas: A. > Business School > Accounting and Finance
B. > Theses
Item ID: 10179
Depositing User: Adam Miller
Date Deposited: 12 Jul 2013 10:47
Last Modified: 03 Apr 2019 14:28
URI: https://eprints.mdx.ac.uk/id/eprint/10179

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