Zeszyty Teoretyczne Rachunkowości (Nov 2015)
Non-controlling interests, financial performance and the equity of groups. An empirical study of groups listed on the Warsaw Stock Exchange
Abstract
The purpose of this article is to (a) analyze IFRS requirements for the recognition and presentation of non-controlling (minority) interests in consolidated financial statements in relation to theoretical concepts of consolidation of financial statements, and (b) assess the share and importance of non-controlling inter-ests in financial performance and the equity of the groups of companies in practice. For the purpose of the article, selected scientific methods have been used, including: descriptive and analytical ones (for analyzing the theoretical concepts and IFRS requirements), critical analysis, especial-ly used for the literature review, and for the assessment of practice: primary empirical research methods, and quantitative methods, including descriptive statistics, nonparametric tests and correlation analysis. The empirical material collected was used to verify several hypotheses related to non-controlling interests of the groups whose parents are registered in Poland and whose securities are traded on a regulated, Polish capital market (Warsaw Stock Exchange). The empirical evidence is that non-controlling interests represent a very small part of group’s equity (taking the mean of about 3.5%, but the median below 1%) and obviously, they are significantly lower than the share of majority interests. Their deviation among the different classes of companies (big, small and banks) is negligible. Slightly higher is the share of minority interests in the group’s net profit and total comprehensive income. However, no significant difference is to be found between the shares of non-controlling interests in the group’s equity, net profit and total comprehensive income. Overall, shares of majority (minority) interests in a group’s income are in line with their shares in the group’s equity. The hypothesis on comparable returns on non-controlling and majority interests (in terms of ROE) cannot be rejected if both net profit and losses are considered. How-ever, if losses are skipped then there is evidence that non-controlling interests are more profitable than majority interests. Analysis of the impact of the number of subsidiaries in groups on non-controlling interests indicates the existence of such an effect only in relation to the equity (rather obvious but weak). No effect is observed for the impact on net profit for the entire sample.
