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Article
Publication date: 1 August 1998

I. Theodossiou and M.J. White

This paper investigates the relationship between tenure and earnings using two different approaches utilising a matched employer‐employee sample. In the first approach a…

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807

Abstract

This paper investigates the relationship between tenure and earnings using two different approaches utilising a matched employer‐employee sample. In the first approach a two step procedure is adopted where the tenure status is modelled as endogenous and subject to choice decision. In the second approach the effect of tenure on earnings is estimated by a system of simultaneous equations using three stage least squares. The results suggest the tenure is a significant determinant of earnings.

Details

Journal of Economic Studies, vol. 25 no. 4
Type: Research Article
ISSN: 0144-3585

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Book part
Publication date: 6 August 2018

Julie L. Hotchkiss and Anil Rupasingha

The purpose of this chapter is to assess the importance of individual social capital characteristics in determining wages, both directly through their valuation by…

Abstract

The purpose of this chapter is to assess the importance of individual social capital characteristics in determining wages, both directly through their valuation by employers and indirectly through their impact on individual occupational choice. We find that a person’s level of sociability and care for others works through both channels to explain wage differences between social and nonsocial occupations. Additionally, expected wages in each occupation type are found to be at least as important as a person’s level of social capital in choosing a social occupation. We make use of restricted 2000 Decennial Census and 2000 Social Capital Community Benchmark Survey.

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Book part
Publication date: 23 October 2009

Kurt V. Krueger and Gary R. Albrecht

This chapter examines the legal and scientific approaches taken in the United States for computing economic damages due to personal injury and wrongful death. The U.S. law…

Abstract

This chapter examines the legal and scientific approaches taken in the United States for computing economic damages due to personal injury and wrongful death. The U.S. law of tort damages conforms to a general economic valuation of reduced or lost productivity due to injury under the goal of assigning tort damages optimally so that harm in the society is minimized. Today, “economic damages” are defined in every U.S. jurisdiction, and the field of forensic economics has produced a body of literature concerned with accurately measuring them.

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Personal Injury and Wrongful Death Damages Calculations: Transatlantic Dialogue
Type: Book
ISBN: 978-1-84855-302-6

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Article
Publication date: 19 July 2013

Hsien‐Li Lee and Hua Lee

The purpose of this paper is to examine the association between audit quality and value relevance of representative accounting measures, such as earnings and book value of equity.

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2143

Abstract

Purpose

The purpose of this paper is to examine the association between audit quality and value relevance of representative accounting measures, such as earnings and book value of equity.

Design/methodology/approach

The authors estimate the standard value relevance equations and the modified equations by ordinary least square regressions and use two ways to compare the difference in the value relevance of earnings and book value of equity audited by Big 4 auditors and non‐Big 4 auditors, as characterized by the coefficient of determination, R2; and based on previous lines of published research.

Findings

Some evidence was found that, in the Taiwan capital market, in general, the earnings and book value of equity audited by Big 4 auditors explain more variations in stock return than those audited by non‐Big 4 auditors. The results are robust to different empirical models and measurements of value relevance and control for risk and growth factors. Consequently, both earnings and book value audited by Big 4 audit firms are generally more relevant than those audited by non‐Big 4 audit firms.

Originality/value

Assuming that the Big 4 audit firms provide a higher level of assurance and credibility, the overall results are generally consistent with the authors' prediction that audit quality, as captured by size of audit firms, improves the value relevance of earnings and book value of equity.

Details

Managerial Auditing Journal, vol. 28 no. 7
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 1 March 1991

Stephen Dearden

This article is principally a case study establishingthe existence of an internal labour market inBritish Rail, and its significance for the long‐termwage structure…

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197

Abstract

This article is principally a case study establishing the existence of an internal labour market in British Rail, and its significance for the long‐term wage structure. Drawing on the work of Doeringer and Piore it outlines the advantages that internal labour markets would be expected to offer both employers and employees, and the implications which these have for the process of wage determination. It briefly reviews previous case studies supporting the importance of the role of comparisons, both internal and external, in wage bargaining; and then turns to the study of British Rail. Finding the characteristics expected of an internal labour market, it then establishes that the wage structure of the industry has demonstrated a considerable degree of stability over the period 1950‐85, despite considerable changes in relative productivities. This degree of consistency is regarded as being difficult to reconcile with the dominance of market forces in wage determination.

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International Journal of Manpower, vol. 12 no. 3
Type: Research Article
ISSN: 0143-7720

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Article
Publication date: 1 December 2007

Stephen Kean and Peter Wells

Forecasting future period profitability is widely identified as an aim of financial statement analysis, and these forecasts are typically relied upon for the estimation of…

Abstract

Forecasting future period profitability is widely identified as an aim of financial statement analysis, and these forecasts are typically relied upon for the estimation of firm value. To facilitate this, the decomposition of earnings into its components or drivers, is typically advocated. This paper investigates the existence of systematic differences in persistence across the components of earnings. If components of earnings experience differences in persistence, this may provide insights into the determinants of aggregate earnings level and persistence. This paper provides evidence of differences in persistence between components of earnings. Differences are found between components formed on the basis of: financial ratios; operating and financing activities; and cash and accruals. Furthermore, there is evidence that earnings components improve the explanatory power of models evaluating aggregate earnings persistence, with this result being strongest for firms with extreme income decreasing accruals. Due to the pivotal role of earnings in firm valuation, the results from this paper have direct implications for valuation.

Details

Accounting Research Journal, vol. 20 no. 2
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 1 July 2006

Ralph Palliam

The purpose of this paper is to test assertions that economic value added (EVA) is more highly associated with stock returns and firm values than accrual earnings, and…

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3514

Abstract

Purpose

The purpose of this paper is to test assertions that economic value added (EVA) is more highly associated with stock returns and firm values than accrual earnings, and evaluates which components of EVA, contribute to these associations.

Design/methodology/approach

Thirty three non‐EVA users and 75 EVA users were selected at random. Variables used in this study were revenues, profits, assets, stockholders’ equity, market value, earnings per share, total return to investors, and percentage cost reduction over time. Data were collected on several metrics.

Findings

The study suggest that the common and widely accepted metrics used by analysts and calculated for EVA users are not necessarily superior to that of non‐EVA users. The evidence support that EVA is somewhat invalid, unreliable, and questionable.

Research limitations/implications

The first limitation deals with the measurement of capital invested in assets. The second limitation was the use of an accounting definition of the return on equity. The operating income was not cleansed of any expenses which are really capital expenses (in the sense that they create future value). The operating income was adjusted if any cosmetic effects were identified. The third limitation is the determination of cost of capital (estimate). Discounted cash flow valuation assumes that cost of capital is calculated using market values of debt and equity.

Practical implications

This study raises serious doubts about the capacity of EVA to deliver superior metrics. EVA users may be placing themselves at unnecessary risks and costs. Study shows that EVA is not a satisfactory descriptor of the real world and, therefore, it should be used with caution by management consultants, practitioners, and investors.

Originality/value

The movement in stock prices reflects something other than EVA.

Details

Review of Accounting and Finance, vol. 5 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

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Article
Publication date: 8 January 2019

Michael Howard, Warren Maroun and Robert Garnett

The purpose of this paper is to examine the possibility of South African companies listed on the Johannesburg Stock Exchange (JSE) using adjusted earnings as a part of an…

Abstract

Purpose

The purpose of this paper is to examine the possibility of South African companies listed on the Johannesburg Stock Exchange (JSE) using adjusted earnings as a part of an impression expectation management strategy focused on demonstrating how reported earnings measures meeting or beating analysts’ earnings forecasts.

Design/methodology/approach

A multiple response analysis approach is used. Earnings adjustments are coded according to a defined typology and assessed for their status as either valid or invalid. The number of occurrences of adjusted earnings measures over a five year period (2010-2014) meeting or beating analyst forecasts is calculated.

Findings

The use of adjusted earnings by JSE listed companies is a common occurrence. There is evidence to suggest that this is used part of an impression expectation management strategy. Most of the adjustments are invalid. When otherwise valid adjustments are used in a particular year, these are frequently repeated, and when adjusted earnings are reported, these normally exceed analysts’ forecasts.

Research limitations/implications

The paper is based on a relatively small sample from a single jurisdiction and limited time period. Nevertheless, the findings point to the need to revisit how financial performance is measured and reported, evaluate additional regulation to protect investors and understand in more detail exactly how and why companies use adjusted earnings as an impression expectation management tool.

Originality/value

The paper adds to the limited body of research on performance reporting outside of the USA and Europe. It also examines the use of adjusted earnings in a unique setting where, in addition to IFRS numbers, companies are required to report a mandatory adjusted earnings figure (headline earnings).

Details

Meditari Accountancy Research, vol. 27 no. 1
Type: Research Article
ISSN: 2049-372X

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Article
Publication date: 11 April 2008

Nina T. Dorata

This study aims to examine whether CEO compensation is shielded from the negative effects of restructuring charges and asset impairments following the acquisition of the…

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1320

Abstract

Purpose

This study aims to examine whether CEO compensation is shielded from the negative effects of restructuring charges and asset impairments following the acquisition of the controlling interest in the stock of another corporation.

Design/methodology/approach

Regression tests using CEO cash compensation as the dependent variable, and restructuring charges, goodwill impairments, and other asset impairments associated with a target firm as independent test and control variables.

Findings

The results indicate that CEO cash compensation is increased when an acquiring firm with respect to the target firm records restructuring charges. Goodwill impairments have no effect on CEO cash compensation.

Research limitations/implications

This study is limited to the extent that it only considers CEO cash compensation. A future area of research is to examine the association of total CEO compensation and post‐acquisition earnings” charges. Shareholders encourage CEOs to proceed with synergistic restructuring following a merger/acquisition by increasing their compensation.

Originality/value

This study contributes to the literature by concluding that compensation committees consider the contextual nature of earnings” charges and the CEO's direct responsibility for the transaction in the determination of CEO compensation.

Details

Managerial Finance, vol. 34 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

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Book part
Publication date: 3 December 2003

Ahmed Riahi-Belkaoui

The article hypothesizes that the level of corporate social responsibility affects both the informativeness of earnings and the magnitude of discretionary accounting…

Abstract

The article hypothesizes that the level of corporate social responsibility affects both the informativeness of earnings and the magnitude of discretionary accounting accrual adjustments. The hypothesis exploits: (1) the positive relationship between corporate social responsibility and firms’ risk-return profiles; and (2) managers’ incentives in using discretionary accounting accrual adjustments. Results show that corporate social responsibility is positively associated with earnings’ explanatory power for returns and related to the magnitude of accounting accrual adjustments.

Details

Advances in Environmental Accounting & Management
Type: Book
ISBN: 978-0-76231-070-8

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