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Article
Publication date: 1 April 2008

A. Bezuidenhout, C. Mlambo and W.D. Hamman

In financial analysis, forecasting often involves regressing one time series variable on another. However, to ensure that the models are correctly specified, one needs to…

Abstract

In financial analysis, forecasting often involves regressing one time series variable on another. However, to ensure that the models are correctly specified, one needs to first test for stationarity, co‐integration and causality. In testing for causality, the variables should be stationary. If non‐stationary, one can estimate the model in difference form, unless the variables are co‐integrated. This article determines whether cash flow and earnings variables are stationary, and which variable causes the other, using econometric analysis. In most cases, cash flow variables are found to cause earnings variables. This is so when the models are estimated in levels. However, when estimated in first differences, the causal relationship tends to be reversed such that earnings cause cash flows. Further study is recommended, whereby panel data could be used to improve the power of the tests.

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Meditari Accountancy Research, vol. 16 no. 1
Type: Research Article
ISSN: 1022-2529

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Article
Publication date: 13 April 2018

Emmanuel Joel Aikins Abakah, Paul Alagidede, Lord Mensah and Kwaku Ohene-Asare

The purpose of this paper is to re-examine the weak form efficiency of five African stock markets (South Africa, Nigeria, Egypt, Ghana and Mauritius) using various tests…

Abstract

Purpose

The purpose of this paper is to re-examine the weak form efficiency of five African stock markets (South Africa, Nigeria, Egypt, Ghana and Mauritius) using various tests to assess the impact of non-linearity effect and thin trading which are prevalent in African markets on market efficiency.

Design/methodology/approach

The weekly returns of S&P/IFC return indices for five African countries over the period 2000-2013 were obtained from DataStream and analyzed. The study adopted the newly developed Non-Linear Fourier unit root test advanced by Enders and Lee (2004, 2009) which allows for an unknown number of structural breaks with unknown functional forms and non-linearity in data generating process of stock prices series to test the Random Walk Hypothesis (RWH) for the five markets, and an augment regression model.

Findings

In light of the empirical evidence the author(s) using Non-linear Fourier Unit Root Test only fail to reject the RWH for South Africa, Nigeria and Egypt leading to the conclusion that these markets follow the RWH and weak-form efficient whilst Ghana and Mauritius are weak-form inefficient. Besides, evaluating non-linear models without adjusting for thin trading effect shows that, South Africa and Ghana markets are weak-form efficient while Nigeria, Egypt and Mauritius are not. However, after accounting for thin trading effect, the author(s) find that South Africa and Egypt markets follow the RWH. The findings imply that market efficiency results depend on the methodology used.

Originality/value

This paper provides further evidence on stock market efficiency in emerging markets. The finding suggests that thin trading and non-linearity effect influences markets efficiency tests in African stock markets. Thus, recent structural adjustment and liberalization policies have not enhanced stock market operations in Africa. This paper therefore has implications for policy makers and international investors.

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International Journal of Managerial Finance, vol. 14 no. 3
Type: Research Article
ISSN: 1743-9132

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Book part
Publication date: 9 May 2014

Adrián Zicari and Luis Perera Aldama

This chapter presents the cases of two State-owned companies in Uruguay: ANTEL (telephone company) and ANCAP (oil company). Since 2008, these firms have been preparing…

Abstract

Purpose

This chapter presents the cases of two State-owned companies in Uruguay: ANTEL (telephone company) and ANCAP (oil company). Since 2008, these firms have been preparing value-added statements (VAS), a report that shows how value is distributed to stakeholders.

Methodology/approach

Qualitative methods, particularly interviews, and analysis of documents.

Findings

VAS reporting became a highly accepted practice in both firms. VAS reports help to better explain the impact of public policies implemented through these companies – a situation that seldom happens in a private firm. This accounting practice is also consistent with the political decision of increasing accountability in State-owned firms.

Research limitations

Since it is a case study research, we cannot generalize conclusions. This study has focused on the beginnings of this experience; further research may adopt a longitudinal approach by exploring how this accounting practice evolves over time.

Practical implications

These reports are not much read by external audiences (e.g., members of parliaments, public officials, journalists, NGOs). In a similar vein, these reports have not been used much for internal managerial purposes. The use of VAS reports for both public policy and management purposes remain untapped opportunities to explore.

Social implications

These companies consider value distribution as a core commitment in their CSR policies and have consequently decided to make that value distribution explicit in a reporting model.

Originality

There are few studies about VAS reporting in Latin America.

Details

Performance Measurement and Management Control: Behavioral Implications and Human Actions
Type: Book
ISBN: 978-1-78350-378-0

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Article
Publication date: 23 May 2020

Kofi Bondzie Afful and William Opoku

Sub-Saharan African (SSA) stock exchanges are imperfect and inefficient. Therefore, orthodox finance theories are unable to completely explain their market returns. Such…

Abstract

Purpose

Sub-Saharan African (SSA) stock exchanges are imperfect and inefficient. Therefore, orthodox finance theories are unable to completely explain their market returns. Such models mainly identify anomalies when applied to the sub-region. Consequently, this paper develops an original theoretical model to better explain market returns on the sub-continent.

Design/methodology/approach

This paper develops an alternate analytical framework that combines adaptive expectations, Keynesian LM model and modified uncovered interest parity (UIP) formulations to address empirical anomalies identified by previous literature when analyzing SSA's inefficient stock markets. Using panel data, the study first computes the fixed as well as random effects regressions and, later, a Generalized Method of Moments (GMM) dynamic panel regression for further empirical analysis.

Findings

Both the fixed and random effects regression results indicate that the relative output-money supply disparity and foreign inflation-money supply growth rate spread have positive effects on market returns in SSA. On the other hand, foreign interest rates have an inverse effect. Although the GMM dynamic panel regression has similar results, it additionally finds that market returns in SSA are autoregressive. This suggests that past returns are persistent.

Research limitations/implications

A key implication is that multipliers and transmission mechanisms in SSA may take longer to adjust, thereby limiting short-run market returns. Also, policymakers must encourage a critical mass of firms to list in order to enhance efficiency. Additionally, policy variables significantly influence returns. One limitation is the high market segmentation in SSA. This heightens heterogeneity, emphasizing fixed effects.

Practical implications

Also, the findings of this study may not apply to all emerging economies as SSA economies are highly heterogeneous.

Social implications

The segmented nature of SSA stock markets may have implications for income inequality and the distribution of resources within the economy. Also, it indicates that there are limits to how firms use capital markets on the sub-continent.

Originality/value

This paper abstracts from the strict ideal market conditions prescribed by modern finance theories and develops an original modified UIP model. It finds that SSA stock markets may be more sensitive to policy variables, instead of determinants postulated by orthodox finance concepts. The study offers opportunities for further critical examination of returns in imperfect frontier markets.

Details

International Journal of Emerging Markets, vol. 16 no. 4
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 22 February 2011

Collins G. Ntim, Kwaku K. Opong, Jo Danbolt and Frank Senyo Dewotor

The purpose of this paper is to investigate and compare the weak‐form efficiency of a set of 24 African continent‐wide stock price indices and those of eight individual…

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3553

Abstract

Purpose

The purpose of this paper is to investigate and compare the weak‐form efficiency of a set of 24 African continent‐wide stock price indices and those of eight individual African national stock price indices.

Design/methodology/approach

Variance‐ratio tests based on ranks and signs were used to examine the weak‐form efficiency of the 32 stock price indices investigated.

Findings

On average, it was found that irrespective of the test employed, the returns of all the 24 African continent‐wide stock price indices examined in the study are less non‐normally distributed compared to the eight individual national stock price indices examined. The authors also report evidence of the African continent‐wide stock price indices having significantly better weak‐form informational efficiency than their national counterparts.

Practical implications

The policy implication of this evidence is that the African equity price discovery process can be significantly improved if African stock markets integrate their operations. Economically, this may contribute to improved liquidity and more efficient allocation of capital, which in turn can be expected to have a positive impact on economic growth.

Originality/value

The paper makes two major contributions to the extant literature. First, it offers for the first time a comparative analysis of the informational efficiencies of a sample of national stock price indices as against African continent‐wide stock price indices. Second, there is no prior evidence as to whether African stock markets can improve their informational efficiencies by integrating their operations. The paper fills this gap by demonstrating that the African equity price formation process can be improved if African stock markets integrate their operations.

Details

Managerial Finance, vol. 37 no. 3
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 8 December 2017

Pei-Chi Kelly Hsiao and Martin Kelly

Integrated reporting (IR) aims to improve the quality of information available to capital providers. While IR is associated with decreases in investor uncertainty and…

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1588

Abstract

Purpose

Integrated reporting (IR) aims to improve the quality of information available to capital providers. While IR is associated with decreases in investor uncertainty and increases in firm value, it is unclear how IR information directly influences investment decisions. This paper aims to investigate the investment considerations of Taiwanese investors and their initial impressions of the International Integrated Reporting Framework (IIRC Framework). In doing so, this study examines the relationships between investment considerations and the IIRC Framework’s concepts.

Design/methodology/approach

Semi-structured interviews were undertaken with 16 investors in Taiwan. Thematic analysis was used to analyse the data collected.

Findings

In addition to economic and financial outlook, competitive advantages and ownership structure, Taiwanese investors emphasise management credibility as an important factor that influences investment decisions. Investors are reliant on private information sources and quantitative data. Sustainability disclosures and sustainability performance beyond legal requirements are often not considered. Taiwanese investors lack awareness of the IIRC Framework and are sceptical about the premise that integrated reports can provide information material to investment appraisal. The assertion that integrated reports reduce information asymmetry and influence investment decisions has to be treated with caution.

Research limitations/implications

Self-selection bias and a potential lack of transferability in the findings are issues inherent in the research method and sample used.

Practical implications

IR information needs to be frequently updated rather than disclosed in a periodic report. Furthermore, integrated reports need to demonstrate a direct link between non-financial performance and financial value creation.

Social implications

Mandating the supply of integrated reports is unlikely to influence investors’ capital allocation decisions unless investor demand is a driver of the regulation.

Originality/value

This study is one of the few to investigate IR from the investor’s perspective. Observations from this preliminary study warrant further investigations into the relevance of IR to investment communities globally.

Details

Sustainability Accounting, Management and Policy Journal, vol. 9 no. 1
Type: Research Article
ISSN: 2040-8021

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Article
Publication date: 16 March 2015

Rick Edgeman

This paper aims to address wicked sustainability issues lurking behind sensational headlines: “Humanity faces significant and unprecedented challenges on grand, global

Abstract

Purpose

This paper aims to address wicked sustainability issues lurking behind sensational headlines: “Humanity faces significant and unprecedented challenges on grand, global scales”. Such headlines refer to the span of such challenges as well as their complex roots and consequences. In a cosmic version of the “chicken or the egg” issue, causes and consequences of these grand global challenges are often difficult to distinguish from one another, although distinction is critical to solution derivations. Sustainable Enterprise Excellence, Resilience & Robustness (SEER2) is discussed relative to selected wicked challenges, including ones associated with climate change and human security.

Design/methodology/approach

Roots of grand global challenges and the present and future reality they portend are discussed relative to intersections with enterprise strategy, performance and impact.

Findings

Social-ecological innovation, big and small data analytics and intelligence and supply chain proficiency are identified as key drivers of enterprise response to grand global challenges. These are embedded in a holistic model for enterprise sustainability, resilience and robustness.

Social implications

The SEER2 approach to enterprise sustainability, resilience and robustness that emphasizes performance and impact has the capability to aid progress toward more sustainable futures for enterprises and humankind alike.

Originality/value

The SEER2 model leverages business excellence thinking to advance strategic and tactical approaches to enterprise excellence, sustainability, resilience and robustness. As such, the model is distinctly performance-oriented. Performance alone is not sufficient, however, so that impact – financial, societal and ecological – is also deeply embedded.

Details

Measuring Business Excellence, vol. 19 no. 1
Type: Research Article
ISSN: 1368-3047

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Article
Publication date: 11 June 2018

Elda du Toit, John Henry Hall and Rudra Prakash Pradhan

The presence of a day-of-the-week effect has been investigated by many researchers over many years, using a variety of financial data and methods. However, differences in…

Abstract

Purpose

The presence of a day-of-the-week effect has been investigated by many researchers over many years, using a variety of financial data and methods. However, differences in methodology between studies could have led to conflicting results. The purpose of this paper is to expand on an existing study to observe whether an analysis of the same data set with some added years and using a different statistical technique provide the same results.

Design/methodology/approach

The study examines the presence of a day-of-the-week effect on the Johannesburg Stock Exchange (JSE) indices for the period March 1995-2016, using a GARCH model.

Findings

The findings show that, contrary to the original study, the day-of-the week effect is present in both volatility and return equations. The highest and lowest returns are observed on Monday and Friday, respectively, while volatility is observed on all five days from Monday to Friday.

Originality/value

This study adds to the existing literature on day-of-the-week effect of JSE indices, where different patterns or, in some cases, no pattern have been noted. Few previous studies on the day-of-the-week effect observed the effect at micro-level for separate industries or made use of a GARCH model. The present study thus expands on the study of Mbululu and Chipeta (2012), by adding four additional observation years and using a different statistical technique, to observe differences that arise from a different time period and statistical technique. The results indicate that a day-of-the-week effect is mostly a function of the statistical technique applied.

Details

African Journal of Economic and Management Studies, vol. 9 no. 2
Type: Research Article
ISSN: 2040-0705

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Article
Publication date: 8 June 2015

Rick L. Edgeman and Zhaohui Wu

Enterprise activities are often harmful to the natural environment or societal fabric, yet approaches that are environmentally constructive or socially responsible can be…

Abstract

Purpose

Enterprise activities are often harmful to the natural environment or societal fabric, yet approaches that are environmentally constructive or socially responsible can be challenging and may not be rewarded by the marketplace. Enterprises that are not sufficiently financially successful perish. The purpose of this paper is to present a model and methodology referred to as sustainable enterprise excellence, resilience and robustness (SEER2) that provides enterprises with a means of balancing financial, social, and environmental considerations. These considerations form the classic elements of the triple bottom line and are central formation of enterprise responses to climate change and social strain.

Design/methodology/approach

A model referred to as the Springboard to SEER2 is introduced. SEER2 explicitly considers societal and environmental performance and impacts that are driven by strategy and implemented through processes. As such criteria associated with the Springboard that address strategy, processes, performance, and impact are also introduced.

Findings

Humanity is at individual, enterprise, and societal levels partially or wholly responsible for many critical and time-sensitive social and environmental challenges. Due to their vast collective resource consumption and resource base, enterprises should also contribute to solving such challenges. The presented Springboard to SEER2 model and associated criteria provide a rigorous, yet defined path for enterprises that have the determination to confront such challenges.

Originality/value

This is among the first explorations of enterprise self-assessment in general and SEER2 in particular that explicitly consider strategies, processes and activities important to mitigation of climate change and social strain.

Details

The TQM Journal, vol. 27 no. 4
Type: Research Article
ISSN: 1754-2731

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Article
Publication date: 21 November 2016

Monika Dhochak and Anil Kumar Sharma

The purpose of this paper is to identify and rank critical factors influencing investment decisions of venture capitalists.

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1928

Abstract

Purpose

The purpose of this paper is to identify and rank critical factors influencing investment decisions of venture capitalists.

Design/methodology/approach

To identify and prioritize factors affecting investment decisions of venture capitalists, a two-phase methodology was adopted: in the first phase, critical factors influencing venture capitalists’ investment decisions were identified using exploratory factor analysis; the second phase entailed the use of a multi-criteria decision-making technique – analytical hierarchal process (AHP) which involved assigning weights to, and prioritizing the identified criteria and sub-criteria.

Findings

Seven factors were found to significantly influence investment decisions of venture capitalists: entrepreneur’s characteristics, product or services, market characteristics, management skills, financial consideration, economic environment and institutional and regulatory environment. Findings revealed that entrepreneur’s characteristics, financial consideration and product or services were prime influencers of venture capitalists’ investment decisions.

Research limitations/implications

As for limitations, first, the study considers limited number of factors influencing investment decisions of venture capitalists; there may be other influencers not considered in this study. Second, the AHP methodology assumes that the various decision-making criteria and sub-criteria are independent of each other; in real life, there may be inter-dependency among criteria. Third, the hierarchal model has been tested in the Indian venture capital industry only, and generalizability of results with respect to other industries is questionable.

Practical implications

The present study identifies and ranks seven factors found to significantly influence investment decisions of venture capitalists. Venture capitalists could use this list of factors as a guideline before making investment decisions, and if considering all factors is not possible, take into account the factors given top rank so that they arrive at informed and intelligent decisions.

Originality/value

This study is the first to identify economic factors (economic environment and institutional & regulatory environment) as influencers of venture capitalists’ investment decisions. Further, no study in the past has attempted to rank or prioritize factors influencing venture capitalists’ investment decisions; this is the first attempt of the kind.

Details

Journal of Small Business and Enterprise Development, vol. 23 no. 4
Type: Research Article
ISSN: 1462-6004

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