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Article
Publication date: 23 May 2008

Alex Faseruk and Alex Faseruk

The purpose of this paper is to survey the accounting concepts of valuation and the direction of accounting research in terms of development of valuation models. It also…

Abstract

Purpose

The purpose of this paper is to survey the accounting concepts of valuation and the direction of accounting research in terms of development of valuation models. It also simulates some of the models. Moreover, the Dividend Discount Model, a financial model, is the foundation of a number of accounting based models and is discussed.

Design/methodology/approach

The objectives are achieved by surveying the literature for accounting models and empirical evidence for the model. The methodology also incorporates simulating the models under different conditions to find out the valuation predicted.

Findings

It was found out that the accounting models predict that accrual principles play a role in increasing the discrepancy between the book value and the market value of equity. Some of the recent valuation models, like the Feltham–Ohlson linear information model, incorporate accrual principles like conservatism. Though the empirical evidences are mixed for these models, it provides a theoretical framework to incorporate accrual principles in the accounting valuation models.

Practical implications

This paper provides practitioners with a snapshot of different models and their limitations.

Originality/value

This paper provides a comprehensive picture of the state of accounting valuation models and provides input for further development of these models.

Details

Management Research News, vol. 31 no. 6
Type: Research Article
ISSN: 0140-9174

Keywords

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Article
Publication date: 20 June 2008

Alex Faseruk and Dev R. Mishra

The purpose of this paper is to examine the impact of US dollar exchange rate risk on the value of Canadian non‐financial firms.

Abstract

Purpose

The purpose of this paper is to examine the impact of US dollar exchange rate risk on the value of Canadian non‐financial firms.

Design/methodology/approach

The sample, from the Compustat database, includes all non‐financial Canadian firms with sales over $100 million. The study segregates firms into hedging and non‐hedging groups and applies statistical techniques to test if hedging enhances value.

Findings

The results demonstrate that Canadian firms that have higher levels of US$ sales tend to use derivatives more frequently through higher levels of US$ exposure. Firms that have both US sales and assets appear less likely to use hedging. Firms with an American subsidiary and use financial instruments to hedge have higher values. When operational hedging is used with financial hedging, it is a value enhancing activity increasing their market‐to‐book by 14 per cent and market value‐to‐sales by 40 per cent. Incremental impact of these two hedging strategies is to enhance value by 7 per cent.

Research limitations/implications

The sample from Compustat captures large capitalization Canadian firms but ignores about 75 per cent of Canadian firms. There is a bias towards larger firms. Some hedging items are not disclosed on financial statements. A survey would enhance and complement these results.

Practical implications

The paper finds that it is important for Canadian firms that have exports denominated in US dollars to hedge their exposure. The full value of hedging is reaped by using both operational and financial hedges.

Originality/value

This study is the first that examines US dollar risk management by Canadian firms.

Details

Management Research News, vol. 31 no. 8
Type: Research Article
ISSN: 0140-9174

Keywords

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Article
Publication date: 8 June 2021

Kobana Abukari, Erin Oldford and Neal Willcott

In recent years, student-managed investment funds (SMIFs), experiential learning programs at an increasing number of universities, have attracted significant scholarly…

Abstract

Purpose

In recent years, student-managed investment funds (SMIFs), experiential learning programs at an increasing number of universities, have attracted significant scholarly interest. In this article, we review the academic literature on this pedagogy.

Design/methodology/approach

We use the systematic review method to assess a sample of 85 articles published in 30 journals during the period 1975 to 2020.

Findings

Our literature review reveals four streams of research: best practices and challenges, investment management, innovation and trends and SMIFs in a research setting. We also propose future research directions, including specific gaps in the literature, a focus on innovations to traditional programs, systematic investment performance and expansion into behavioral finance issues.

Originality/value

We contribute a comprehensive view of the body of scholarship on SMIFs, identifying existing streams of research and future research directions that will help guide the development of SMIF research into a cohesive and productive space.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 9 November 2015

Ashrafee Tanvir Hossain

– The purpose of this paper is to examine the impact of governance quality on firms with multiple voting structures.

Abstract

Purpose

The purpose of this paper is to examine the impact of governance quality on firms with multiple voting structures.

Design/methodology/approach

The sample includes 487 acquisitions undertaken by dual-class firms from 1996 to 2009. The author used event studies (Patell, 1976) for short-term performance analysis around merger announcement dates; Berkovitch and Narayanan (1993) methods to identify the motive behind these transactions; and standard benchmark adjusted return on assets (and return on sales) (Barber and Lyon, 1996) and BHAR (Mitchell and Stafford, 2000) to analyze long-term post-acquisition performance.

Findings

First, dual-class acquirers with better governance quality show stronger performance around takeovers which indicates that these firms make better acquisition decisions. These results hold even after controlling for different firm and deal characteristics. Second, transactions undertaken by acquirers with good governance show little or no sign of agency motive. This reinforces the findings in first. Third, the author reports that acquirers with above-median governance quality display stronger long-term post-acquisition operating as well as stock performances. These results are robust to different benchmarks used for this study.

Originality/value

This paper expands the literature on dual-class firms by showing the impact of governance quality on acquisition activities undertaken by these firms. This is the first study to show that despite agency issues inherent in the dual-class structure, improving governance quality would have a positive impact, at least in the case of corporate takeovers.

Details

Managerial Finance, vol. 41 no. 11
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 30 July 2018

Harjeet Bhabra and Ashrafee Tanvir Hossain

The purpose of this paper is to analyze and compare the influence of the Sarbanes–Oxley (SOX) Act of the USA and the Canadian SOX (C-SOX) through the comparison of…

Abstract

Purpose

The purpose of this paper is to analyze and compare the influence of the Sarbanes–Oxley (SOX) Act of the USA and the Canadian SOX (C-SOX) through the comparison of corporate acquisitions in these two countries.

Design/methodology/approach

The final sample includes 1,187 merger and tender offers undertaken by publicly traded (TSX listed) Canadian firms between 1990 and 2016. The authors use standard event study methodology (Patell, 1976) and Berkovitch and Narayanan’s (1993) seminal method to examine announcement period performance and deal motive, respectively.

Findings

The findings support the pro-regulation hypothesis which states that stricter regulations are more useful. Cross-listed acquirers exposed to SOX regime performed much better (both short- and long-term) than non-cross-listed counterparts with only C-SOX exposure. These findings are both statistically and economically significant.

Research limitations/implications

This study has direct implications as it provides evidence to the legislatures of the provinces, as well as to the federal government, that stricter regulations are effective and Canada should enact additional corporate legislation. Canada may have fared well in the past, but dynamics are changing and may further change in the future, and therefore, timely and stricter corporate legislation are more appropriate.

Practical implications

This study has direct implications as it provides evidence to the legislatures of the provinces, as well as to the federal government, that stricter regulations are effective and Canada should enact additional corporate legislation. Canada may have fared well in the past, but dynamics are changing and may further change in the future, and therefore, timely and stricter corporate legislation are more appropriate.

Originality/value

This study contributes to the growing literature of SOX-related studies. This is the first study to investigate comprehensively the differences between the two laws enacted by these neighboring countries. As USA and Canada share largely integrated capital markets and are each other’s biggest trading partner, this genre of research has great value. It is a timely study as the Canadian Federal Government is looking into standardizing corporate legislation across provinces and territories.

Details

Managerial Finance, vol. 44 no. 8
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 10 April 2017

Harjeet Singh Bhabra and Ashrafee Tanvir Hossain

The purpose of this paper is to analyze and compare the performance of corporate acquisitions between the pre- and post-SOX periods, using both short-term and long-term analyses.

Abstract

Purpose

The purpose of this paper is to analyze and compare the performance of corporate acquisitions between the pre- and post-SOX periods, using both short-term and long-term analyses.

Design/methodology/approach

The sample includes 9,463 mergers and tender offers undertaken by publicly traded US firms between 1996 and 2009. The authors used the standard event study methodology for short-term performance analysis; Berkovitch and Narayanan (1993) method to identify merger motives; and standard benchmark adjusted return on assets (sales) (Barber and Lyon, 1996) and buy-and-hold abnormal returns (Mitchell and Stafford, 2000) to analyze long-term performance.

Findings

Compared to the pre-SOX period, US acquirers experience significantly higher announcement returns in the post-SOX period; the results are robust to various controls like bidder, target and deal characteristics, bidder management quality, and product market competition. Similar results (in favor of post-SOX US acquirers) are obtained with long-term post-acquisition operating and stock performance analyses.

Research limitations/implications

This paper only addressed domestic acquisitions.

Originality/value

This paper adds to the growing body of research on the impact of SOX on publicly traded US corporations. By examining corporate acquisitions, an important long-term investment decision for a firm, the paper shows that despite the complex nature of SOX, substantial compliance costs and the unintended negative consequence it engendered, the act had a beneficial impact in an important area of corporate finance.

Details

Managerial Finance, vol. 43 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 12 February 2018

Harjeet S. Bhabra and Ashrafee T. Hossain

The purpose of this paper is to examine whether or not the seminal legislation called the Sarbanes-Oxley Act (SOX) influenced a strategic shift in the merger and…

Abstract

Purpose

The purpose of this paper is to examine whether or not the seminal legislation called the Sarbanes-Oxley Act (SOX) influenced a strategic shift in the merger and acquisition (M&A) market.

Design/methodology/approach

The sample consists of 4,839 completed deals undertaken by US acquirers from the Securities Data Corporation’s US M&As database from January 1, 1996 to December 31, 2009. The authors used the standard event study methodology for short-term performance analysis and the Berkovitch and Narayanan (1993) method to identify merger motives.

Findings

By following the same acquirers who participated during both pre- and post-SOX periods, the authors find that these acquirers generate 1-1.5 percent more returns for their stockholders around M&A announcement dates and that the motivation has shifted to value maximization (synergy), a notable strategic shift.

Research limitations/implications

All acquirers and targets are public.

Originality/value

This paper adds to SOX-related literature as well as to M&A literature. By analyzing M&A deals, often the largest capital investments for acquirers, this paper shows that, despite criticism of SOX, this legislation fundamentally contributed to a strategic shift in the M&A market.

Details

Managerial Finance, vol. 44 no. 2
Type: Research Article
ISSN: 0307-4358

Keywords

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