Marc Badia
professor
Accounting and Control
IESE Business School Universidad de Navarra
Spain
Biography
Marc Badia is Assistant Professor in the department of Accounting and Control at IESE Business School (University of Navarra). He earned his Ph.D. in Financial Accounting with distinction from Columbia University (New York). His research interests focus on fair value accounting and the use of financial statement analysis for equity valuation. He has carried out consulting projects related to business valuation and cost systems, and has also interned as financial analyst at a major investment bank in London. He accumulates over 12 years of experience in the management of educational non-for-profit institutions, both in Spain and in the United States. Currently, he is a member of the board of directors for a family business and for a hedge fund that invests in equities following quantitative trading strategies based on fundamentals. Prof. Badia holds an MBA from IESE Business School, spending one semester at Kellogg School of Management (Northwestern University), and a Bachelors in Business from ESADE, majoring in Finance.
Research Interest
Areas of Interest * Fair value accounting * Accounting-based business analysis and valuation * International financial accounting (IFRS) * Trading strategies based on fundamentals
Publications
-
Inventories are among the basic investments a business needs to undertake. Companies that sell tangible products ordinarily need to keep some units in store to fulfill customers' orders. These units will be sold at a price higher than the original purchase or production cost, generating a profit. Obviously, financial accounting should reflect such a crucial economic activity. This note explains how to recognize and value inventories in commercial and manufacturing companies. It starts with the initial recording and the recognition of inventory sales. Then the note describes how to impair inventories following the lower of cost or market and also the methods to keep track of inventories (i.e., FIFO, weighted average cost and LIFO). Finally, the note explains how to account for inventories in manufacturing companies using absorption costing.
-
Shareholders' equity is the wealth of the owners in the firm. It consists of two elements: a) the capital contributed by them and b) the earnings generated by the operations and retained in the firm. This note explains how to account for the principal transactions that can affect shareholders' equity: Capital contributions, Common equity, Preferred stocks, Earnings and comprehensive income, Corporate distributions, Cash dividends, Dividends on account, Share dividends, Capital write-downs, Share splits, Share repurchases, Share repurchases for treasury, Share repurchases for cancellation, Share repurchases, Share repurchases for treasury, Share repurchases for cancellation.
-
Firms measure fair values using Level 2 or 3 inputs when items do not trade in liquid markets, limiting market discipline over the measurements. We provide evidence that firms holding higher proportions of financial instruments measured at Level 2 and 3 fair values report more conditionally conservative comprehensive income attributable to fair value measurements, consistent with firms trying to mitigate investors' discounting of the measurements. We further predict and find that this conditional conservatism (1) increases with governance mechanisms that increase the strength and persistence of firms' incentives to report conservatively and (2) decreases with firms' earnings management incentives.
