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1 – 10 of 17Recent studies on the securities market’s differential pricing of earnings components have shown that cash flow from operations is more highly valued than total accruals and that…
Abstract
Purpose
Recent studies on the securities market’s differential pricing of earnings components have shown that cash flow from operations is more highly valued than total accruals and that moderate cash flow from operations has higher valuation than extreme total accruals. An interesting question that follows is whether these findings hold regarding the differential valuations of cash flow and current accruals. This study aims to extend prior research by addressing this issue in two ways. First, the authors examine the incremental information content of cash flow from operations beyond working capital from operations. Second, the authors assess the effect of extreme working capital from operations on the incremental information content of cash flow from operations. This study aims to extend prior research by addressing this issue in two ways.
Design/methodology/approach
This study adopts market-based accounting research to test its hypotheses and to achieve its objectives. Specifically, this study uses statistical associations between accounting data and stock returns to examine the incremental information content (value relevance) of cash flow and working capital from operations and the effect of extreme working capital from operations on the incremental information content of cash flow.
Findings
The results show that cash flow from operations is not more highly valued than current accruals (both being valued equivalently). However, moderate cash flow from operations has higher valuation than extreme current accruals (each is valued differently). Overall, these research findings indicate that cash flow becomes more important for valuation as accruals get “extreme”.
Practical implications
As accruals are unlikely to persist to be permanent across the years, these results can be interpreted as indicating that cash flow and accruals information are used jointly by investors, with one being more important than the other depending on the relative “extremeness” of each. Therefore, both are of value to the investor and both should be reported.
Originality/value
The paper contributes to the UK research on determining the preferred level of disaggregation of earnings components, i.e. operating cash flow, current accruals and non-current accruals. This would help investors to improve their investment and credit decisions.
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Hajam Abid Bashir, Manish Bansal and Dilip Kumar
This study aims to examine the value relevance of earnings in terms of predicting the value variables such as cash flow, capital investment (CI), dividend and stock return under…
Abstract
Purpose
This study aims to examine the value relevance of earnings in terms of predicting the value variables such as cash flow, capital investment (CI), dividend and stock return under the Indian institutional settings.
Design/methodology/approach
The study used panel Granger causality tests to examine causality relationships among variables and panel data regression models to check the statistical associations between earnings and value variables.
Findings
Based on a data set of 7,280 Bombay Stock Exchange-listed firm-years spanning over ten years from March 2009 to March 2018, the results show higher sensitivity of earnings toward cash flows, CI, divided and stock return and vice-versa. Further, the findings deduced from the empirical results demonstrate that earnings are positively related to value variables. Overall, the results established that earnings are value-relevant and have predictive ability to forecast the value variables that facilitate investors in portfolio valuation. The results are consistent with the predictive view of the value relevance of earnings. Several robustness checks confirm these results.
Originality/value
This study brings new empirical evidence from a distinct capital market, India, and provides a new facet to the value relevance debate in terms of its prediction view. The study is among earlier attempts that jointly measure the ability of earnings in forecasting different value variables by taking a uniform sample of firms at the same period. Hence, the study provides a comprehensive view of the predictive ability of reported earnings.
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Mark Brosnan, Keith Duncan, Tim Hasso and Janice Hollindale
It has been two decades since the first academic paper shone a spotlight on non-GAAP earnings. The past 20 years of research investigates concerns over the misuse of these…
Abstract
Purpose
It has been two decades since the first academic paper shone a spotlight on non-GAAP earnings. The past 20 years of research investigates concerns over the misuse of these disclosures and resulted in some significant changes to accounting and reporting standards across the globe. This paper aims to document the history of non-GAAP reporting and outline the emerging themes of the now matured practice of non-GAAP reporting.
Design/methodology/approach
This systematic literature review searches two popular databases to identify the academic publications relating to non-GAAP reporting between 2002 and 2022. The paper uses bibliographic mapping to present the key statistics of the non-GAAP reporting field of research.
Findings
The non-GAAP reporting environment started out as the “wild West’ but, through regulation and public awareness, emerged as an important supplement to the traditional outputs of financial reporting. Current consensus is recent non-GAAP earnings are informative to users but there is lack of research into qualitative non-GAAP disclosures and the vast body of archival research needs triangulating with more experimental studies.
Originality/value
This paper contributes to the literature by documenting the past 20 years of non-GAAP reporting and identifying the important existing and emerging research areas concerning non-GAAP earnings disclosures.
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Vineeta Kumari, Satish Kumar, Dharen Kumar Pandey and Prashant Gupta
This study aims to provide insights into different aspects of the extant literature on the effects of dividend announcements. Along with other outputs of a bibliometric study…
Abstract
Purpose
This study aims to provide insights into different aspects of the extant literature on the effects of dividend announcements. Along with other outputs of a bibliometric study, this study provides deeper insights into the concentration of the extant literature and suggest future research agendas.
Design/methodology/approach
This study uses the bibliometric, network and content analysis of the dividend announcement literature indexed in Scopus. This study presents the temporal analysis, the network of authors, countries, author citations and the co-occurrence of author keywords. This study provides the concentration of the extant literature in three clusters and unearth some key future research areas. This study uses the latent Dirichlet allocation method for robustness.
Findings
A total of 54 documents examining the US sample have received 1,804 citations. Interestingly, the first article on emerging markets was published in 2002, when at least 34 articles on developed markets had already been published from 1982 to 2001. The content analysis of top-cited literature unveils diverse insights into dividend announcements’ effects on financial markets. Contagion effects negatively impact non-announcing banks, particularly larger ones. Dividend maintenance affects stock market momentum, influencing loser returns. While current dividend/earnings news may not predict future company performance, information content dominates bond market reactions to post-dividend announcements. Concomitantly, while financially constrained firms exhibit short-term gains but worse long-term performance following dividend increases, larger stock dividends send stronger market signals in China.
Originality/value
This study significantly contributes to the bibliometric and content analysis literature by analyzing the sample documents based on the sample examined. To the best of the authors’ knowledge, no previous bibliometric study in this domain has been conducted to explore the markets (developed and emerging) to which the samples examined belong and the quality of publications from developed and emerging markets.
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Mehmet Bahri Saydam, Jacek Borzyszkowski and Osman M. Karatepe
Online food delivery service has evolved swiftly and stretched the bounds of the catering business. In the gig economy, being a food delivery rider draws employees with the…
Abstract
Purpose
Online food delivery service has evolved swiftly and stretched the bounds of the catering business. In the gig economy, being a food delivery rider draws employees with the promise of flexibility and independence. To this end, the purpose of this paper is to explore the main themes shared in online reviews by food delivery riders and which of these themes are linked to positive and negative ratings.
Design/methodology/approach
The authors used 729 employee reviews posted on the Glassdoor website. In addition, they used content analysis to examine reviews of Uber Eats online food ordering company shared by food delivery riders on an online platform.
Findings
The results of this study include seven main themes: “earning,” “customers,” “orders,” “tips,” “car,” “flexible schedule” and “app” (navigation). Positive concepts are associated with “earning,” “orders,” “tips” and “flexible schedule.” Negative themes are linked to the “app” (navigation), “car” and “customers.”
Practical implications
Management should consider online reviews as employees’ opinions and voices. Specifically, management should provide financial support to employees for car maintenance, offer insurance for income stability and arrange training programs to enable them to use several tip-enhancing behaviors.
Originality/value
No research has been conducted using online reviews from an employment search engine to investigate employees’ experiences of online food delivery. To the best of the authors’ knowledge, this study is one of the first attempts using user-generated content from an employment search engine to explore employees’ experiences.
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Corey Fuller and Robin C. Sickles
Homelessness has many causes and also is stigmatized in the United States, leading to much misunderstanding of its causes and what policy solutions may ameliorate the problem. The…
Abstract
Homelessness has many causes and also is stigmatized in the United States, leading to much misunderstanding of its causes and what policy solutions may ameliorate the problem. The problem is of course getting worse and impacting many communities far removed from the West Coast cities the authors examine in this study. This analysis examines the socioeconomic variables influencing homelessness on the West Coast in recent years. The authors utilize a panel fixed effects model that explicitly includes measures of healthcare access and availability to account for the additional health risks faced by individuals who lack shelter. The authors estimate a spatial error model (SEM) in order to better understand the impacts that systemic shocks, such as the COVID-19 pandemic, have on a variety of factors that directly influence productivity and other measures of welfare such as income inequality, housing supply, healthcare investment, and homelessness.
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This paper aims to fill gap in the literature and explore policy options for resolving the problems of accountability by framing three research questions. The research questions…
Abstract
Purpose
This paper aims to fill gap in the literature and explore policy options for resolving the problems of accountability by framing three research questions. The research questions are (i) whether certain elements of Scott’s (2014) institutional pillars attenuate (accentuate) corporate and public accountability; (ii) whether the presence of ruling party-affiliated enterprises (RPAEs) create an increase (decrease) in the degree of corporate (public) accountability; and (iii) whether there is a particular form of ownership change that transforms RPAEs into public investment companies.
Design/methodology/approach
Using a qualitative research methodology that involves term frequency and thematic analysis of publicly available textual information, the paper examines Mechkova et al.’s (2019 forms of government accountability. The paper analyzes the gaps between the de jure and de facto accountability using the institutional pillars framework.
Findings
The findings of the paper are three. First, there are gaps between de jure and de facto in all three (vertical, horizontal and diagonal) forms of government (public) accountability. Second, the study finds that more than three fourth of the parties that contested the June 2021 election did have regional focus. They did not advocate for accountability. Third, Ethiopia’s RPAEs are unique. They have regional focus and are characterized by severe forms of agency and information asymmetry problems.
Research limitations/implications
The main limitation of the paper is its exploratory nature. Extending this research by using cross-country data could provide a more complete picture of the link between corporate (public) accountability and a country’s institutional pillars.
Practical implications
Academic research documents that instilling modern corporate (public) governance standards in the Sub Sahara Africa (SSA) region has shown mixed results. The analysis made in this paper is likely to inform researchers and policymakers about the type of change that leads to better corporate (and public) accountability outcomes.
Social implications
The institutional change proposed in the paper is likely to advance the public interest by mitigating agency and information asymmetry problems and enhancing government accountability. The changes make the enterprises investable, save scarce jobs, enhance diversity and put the assets in RPAEs to better use.
Originality/value
To the best of the authors’ knowledge, this is the first paper that uses the institutional pillars analytical framework to examine an SSA country's corporate (public) accountability problem. It demonstrates that accountability is a domestic and a (novel) traveling theory. The paper identifies the complexity of resolving the interlock between political institutions and business enterprises. It theorizes that it is impossible to instill modern corporate (public) accountability standards without changing regulatory, normative and cultural cognitive pillars of institutions. The paper contributes to the change management and public interest literature.
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James Bentley and Zhangxin (Frank) Liu
The purpose of this study is to examine the impact of a recent innovation in the uranium market, the Global X Uranium Exchange-Traded Fund (URA), on the trading characteristics of…
Abstract
Purpose
The purpose of this study is to examine the impact of a recent innovation in the uranium market, the Global X Uranium Exchange-Traded Fund (URA), on the trading characteristics of constituent and non-constituent stocks.
Design/methodology/approach
The authors analyse bid-ask spread measures, relative effective spreads and adverse selection costs to assess changes in information asymmetry among uranium stocks. The authors also study abnormal returns to assess the impact of URA on the market.
Findings
Over a three-month period, following the introduction of URA, the authors find uranium stocks display decreased bid-ask spread measures, driven by reductions in information asymmetry. Relative effective spreads decrease by 36% after the introduction of URA, and adverse selection costs decline by 24% over the same period. Uranium stocks experience a significant positive abnormal return of 5.0% the day after the introduction of URA with subsequent price reversals. These suggest that the introduction of URA prompted uninformed traders to rebalance portfolios and migrate to the less information-sensitive Exchange-Traded Fund (ETF), causing temporary deviations in trading characteristics.
Originality/value
The authors demonstrate that the introduction of new financial securities to the market can have a significant impact on the trading characteristics of related equities. As URA is the only ETF in the uranium sector, the authors thereby avoid the influence of multiple ETFs that may have impacted previous studies.
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Li Dai and Yongsun Paik
Conventional wisdom suggests that war in the host country makes it unattractive for foreign firms to invest. To see if this is true for US firms on the aggregate, this paper aims…
Abstract
Purpose
Conventional wisdom suggests that war in the host country makes it unattractive for foreign firms to invest. To see if this is true for US firms on the aggregate, this paper aims to examine the veracity of a “permanent war economy” hypothesis, that foreign direct investment (FDI) may, in fact, increase in the host country not despite, but because of, war, i.e. one that lends credence to the idea that, in the USA, “defense [has] become one of constant preparation for future wars and foreign interventions rather than an exercise in response to one-off threats.”
Design/methodology/approach
The authors test the hypotheses using Generalized Method of Moments estimation, with Heckman Selection, on US FDI data from the Bureau of Economic Analysis and war data from the Correlates of War2 Project, the Uppsala Conflict Data Program/International Peace Research Institute data set, the International Crisis Behavior Project and the Center for Systemic Peace Major Episodes of Political Violence data set. The final sample consists of 351 country-year observations in 55 host countries from 1982 to 2006.
Findings
The findings indicate that overall US FDI in a host country in a given year decreases if the host country is engaged in wars with multiple countries and if the US Government is involved in the war. Most notably, the results show that US involvement in multiple host country wars is actually correlated with increased US FDI into the host country, providing empirical support for the “permanent war economy” hypothesis.
Originality/value
While other studies have focused on war and FDI, the authors have sought to show the impact of the involvement of arguably the most influential country, i.e. the USA, in the sovereign matters of a focal host country. By studying FDI from the USA as a function of US involvement in wars overseas, over the years with the greatest use of private military companies by the USA and the largest portion of global FDI accounted for by the USA, this work motivates a research agenda on home-host-"other” relations in the context of war and FDI, with the “other” being the supranational “elephant in the room.”
Ana Maria Gomez-Trujillo, Maria Alejandra Gonzalez-Perez and Jose Jaime Baena-Rojas
The purpose of this paper is to examine the process of integrating sustainability into the corporate strategy of an emerging market multinational enterprises (EMNE) to achieve and…
Abstract
Purpose
The purpose of this paper is to examine the process of integrating sustainability into the corporate strategy of an emerging market multinational enterprises (EMNE) to achieve and maintain corporate legitimacy over time. The research explores how deploying a corporate sustainability strategy enhances the company’s long-term competitive relevance by creating and maintaining corporate legitimacy and transferring practices based on sustainable development goals within the organization.
Design/methodology/approach
The study adopts a qualitative single-case design, focusing on a corporate energy services company (Interconexión Eléctrica S.A.) operating in volatile, uncertain and turbulent environments.
Findings
The findings indicate that integrating sustainability into the corporate strategy enables subsidiaries to effectively meet global requirements, considering internal and external pressures. This integration also fosters the development of unique capabilities and the internalization of standards, addressing liabilities in foreign markets, thus providing a competitive advantage and safeguarding corporate legitimacy among stakeholders.
Originality/value
This research contributes to the international business literature by providing insights into strategy development and implementation in EMNEs. Specifically, it demonstrates how a Latin American emerging multinational enterprise (multilatina) adopts new sustainability strategies to enhance its business competitiveness. The study also offers guidance for emerging market companies on developing sustainability strategies and transferring them to subsidiaries operating in complex institutional environments. Furthermore, the research provides a rationale for governments and civil society organizations on why firms are committed to sustainability, highlighting its positive impact on firm’s competitiveness and survival in international markets.
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