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1 – 10 of 11Magnus Jansson, Patrik Michaelsen, Doron Sonsino and Tommy Gärling
The paper aims to investigate differences in non-professional and professional stock investors’ trust in and tendency to follow financial analysts’ buy and sell recommendations.
Abstract
Purpose
The paper aims to investigate differences in non-professional and professional stock investors’ trust in and tendency to follow financial analysts’ buy and sell recommendations.
Design/methodology/approach
Online experiment conducted in Sweden in March 2022 comparing non-professional private investors (n = 80), professional investors (n = 33), and master students in finance (n = 28). Information was presented about four company stocks listed on the New York stock exchange. Two stocks were buy-recommended and two stocks sell-recommended by financial analysts. For one stock of each type, the recommendation was presented to participants. Dependent variables were predictions of the stock price after three months, ratings of confidence in the predictions and choices of holding, buying or selling the stock. Ratings were also made of the importance of presented stock-related information as well as trust in analysts’ skill and integrity.
Findings
More positive return predictions were made of buy-recommended than sell-recommended stocks. Non-professionals and to some degree finance students tended to trust financial analysts more than professional investors did and they were more influenced by the presentation of the buy recommendations. All groups made too optimistic return predictions, but the professionals were less confident in their predictions, more likely to sell the stocks and lost less on their investments.
Originality/value
A new finding is that non-professional stock investors are more likely than professional stock investors to trust financial analysts and follow their recommendations. It suggests that financial analysts’ recommendations influence non-professional investors to take unmotivated investment risks. Non-professionals in the stock market should hence be advised to exercise more caution in following analysts’ recommendations.
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Ning Du, Jeffrey Byrne, Robert Knisley, Dwayne Powell and James Valentine
This study aims to examine how financial analysts evaluate other comprehensive income (OCI) information with a focus on the information content and economic substance of OCI gain…
Abstract
Purpose
This study aims to examine how financial analysts evaluate other comprehensive income (OCI) information with a focus on the information content and economic substance of OCI gain and loss.
Design/methodology/approach
This study conducted a 2 × 2 between-subject experiment by manipulating profitability (net profit or net loss) and OCI (OCI gain or loss). A total of 103 equity research analysts participated in the experiment.
Findings
The results show that when the company suffers a net loss, the presence of unrealized gain in OCI appears to cause concern for analysts, in that they assigned a lower valuation to the OCI gain company than the OCI loss company. However, in the cases where the company is profitable, analysts appeared to respond to the direction of OCI (i.e. gain or loss) and incorporated the directional information in their valuation judgment.
Originality/value
The experimental results complement prior archival research on OCI valuation. This study extends prior work on OCI’s decision usefulness, improves understanding of the impact of OCI on firm valuation and contributes to the ongoing debate about whether OCI is viewed as a performance measure. The findings indicate that the effect of OCI gains or losses is most pronounced when the company experiences a loss. During such instances, analysts may interpret a combination of net loss and OCI gain as a potential indicator of earnings management opportunities. Consequently, they may perceive it as a signal of deteriorating future financial performance.
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Douglas J. Cumming and Zachary Glatzer
This chapter focuses on how alternative data can change the nature of financial forecasting through improved short-term forecasting techniques and decreased informativeness from…
Abstract
This chapter focuses on how alternative data can change the nature of financial forecasting through improved short-term forecasting techniques and decreased informativeness from longer term sources. Increased use of social media data leads the charge in transforming this transition. Alternative data are data not from standard financial statements or formal reports. This chapter looks at alternative data from new sources (e.g., social media, Internet of Things [IoT], and digital footprints) and alternative data from new collection methods like web scraping for textual analysis, image analysis, and vocal analysis). It first discusses standard data in financial forecasting. Next, this chapter examines alternative data in financial forecasting. Finally, it discusses alternative data used in studying finance more broadly.
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Jan A. Pfister, David Otley, Thomas Ahrens, Claire Dambrin, Solomon Darwin, Markus Granlund, Sarah L. Jack, Erkki M. Lassila, Yuval Millo, Peeter Peda, Zachary Sherman and David Sloan Wilson
The purpose of this multi-voiced paper is to propose a prosocial paradigm for the field of performance management and management control systems. This new paradigm suggests…
Abstract
Purpose
The purpose of this multi-voiced paper is to propose a prosocial paradigm for the field of performance management and management control systems. This new paradigm suggests cultivating prosocial behaviour and prosocial groups in organizations to simultaneously achieve the objectives of economic performance and sustainability.
Design/methodology/approach
The authors share a common concern about the future of humanity and nature. They challenge the influential assumption of economic man from neoclassical economic theory and build on evolutionary science and the core design principles of prosocial groups to develop a prosocial paradigm.
Findings
Findings are based on the premise of the prosocial paradigm that self-interested behaviour may outperform prosocial behaviour within a group but that prosocial groups outperform groups dominated by self-interest. The authors explore various dimensions of performance management from the prosocial perspective in the private and public sectors.
Research limitations/implications
The authors call for theoretical, conceptual and empirical research that explores the prosocial paradigm. They invite any approach, including positivist, interpretive and critical research, as well as those using qualitative, quantitative and interventionist methods.
Practical implications
This paper offers implications from the prosocial paradigm for practitioners, particularly for executives and managers, policymakers and educators.
Originality/value
Adoption of the prosocial paradigm in research and practice shapes what the authors call the prosocial market economy. This is an aspired cultural evolution that functions with market competition yet systematically strengthens prosociality as a cultural norm in organizations, markets and society at large.
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Rania Pasha, Hayam Wahba and Hadia Y. Lasheen
This paper aims to conduct a comparative analysis of the impact of market uncertainty on the degree of accuracy and bias of analysts' earnings forecasts versus four model-based…
Abstract
Purpose
This paper aims to conduct a comparative analysis of the impact of market uncertainty on the degree of accuracy and bias of analysts' earnings forecasts versus four model-based earnings forecasts.
Design/methodology/approach
The study employs panel regression analysis on a sample of Egyptian listed companies from 2005 to 2022 to examine the impact of market uncertainty on the accuracy and bias of each type of earnings forecast.
Findings
The empirical analysis reveals that market uncertainty significantly affects analysts’ earnings forecast accuracy and bias, while model-based earnings forecasts are less affected. Furthermore, the Earnings Persistence and Residual Income model-based earnings were found to be superior in terms of exhibiting the least susceptibility to the impact of market uncertainty on their forecast accuracy and biasness levels, respectively.
Practical implications
The findings have important implications for stakeholders within the financial realm, including investors, financial analysts, corporate executives and portfolio managers. They emphasize the importance of considering market uncertainty when formulating earnings forecasts, while concurrently highlighting the potential benefits of using alternative forecasting methods.
Originality/value
To our knowledge, the influence of market uncertainty on analysts' earnings forecast accuracy and bias in the MENA region, particularly in the Egyptian market, remains unexplored in existing research. Additionally, this paper contributes to the existing literature by pinpointing the forecasting method, specifically distinguishing between analysts-based and model-based approaches, whose predictive quality is less adversely impacted by market uncertainty in an emerging market.
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This study aims to investigate the impact of terrorism on financial inclusion that is achieved through automated teller machine penetration and bank branch expansion.
Abstract
Purpose
This study aims to investigate the impact of terrorism on financial inclusion that is achieved through automated teller machine penetration and bank branch expansion.
Design/methodology/approach
Eight countries that are the most terrorized countries in the world were analysed using the panel fixed effect regression model and the generalized linear model.
Findings
The results provide evidence that terrorism reduces the level of financial inclusion in countries experiencing terrorism, but the presence of strong legal institutions, accountability governance institutions and political stability governance institutions mitigate the adverse effect of terrorism on financial inclusion.
Originality/value
A growing literature has shown that terrorism affects the economy, yet little is known about its impact on financial inclusion.
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Muhammad Nurul Houqe, Michael Michael, Muhammad Jahangir Ali and Dewan Rahman
The purpose of this paper is to examine the association between company reputation and dividend policy.
Abstract
Purpose
The purpose of this paper is to examine the association between company reputation and dividend policy.
Design/methodology/approach
In this study, sample of 98,809 firm-year observations from 22 countries covering 2005–2016 were used.
Findings
Firm reputation concerns are associated with higher propensities to pay dividends and payout ratios. Further, this positive effect is more pronounced for firms with high free cash flows, high information asymmetry and low institutional monitoring. The results are robust to an instrumental variable approach, propensity score matching and the Heckman two-stage correction approach while addressing endogeneity concerns.
Practical implications
These findings have significant implications for various stakeholders, such as existing and potential investors, managers, policymakers and regulators, by providing insights into the relationship between corporate reputation and firm dividend payout decisions. Corporate reputation is highlighted as crucial for accessing finance, emphasizing the role of national regulators and policymakers in facilitating firms' efforts to improve their reputation. The study highlights the dynamics of corporate reputation and dividend payout, calling for proactive engagement from regulators and policymakers. Crafting policies conducive to reputation-building can enhance firms' financial prospects, indicating the need for strategic interventions at managerial, regulatory and policy levels. Understanding the influence of economic context is crucial for firms to tailor reputation management strategies and optimize funding opportunities in different economic environments.
Originality/value
Overall, results suggest that reputation serves as a disciplining mechanism, where firms will pay dividends to maintain their reputations.
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This paper aims to examine whether firms meeting or just beating an earnings benchmark engage in tone management in earnings conference calls to complement earnings management in…
Abstract
Purpose
This paper aims to examine whether firms meeting or just beating an earnings benchmark engage in tone management in earnings conference calls to complement earnings management in the UK context. It also investigates whether the audience tone in beating or just meeting earnings fails to predict future performance.
Design/methodology/approach
This study was performed using a sample of non-financial UK firms listed in the FTSE 350 index over the period 2010–2015.
Findings
The findings show that firms that exercise more earnings management to meet or just beat earnings are positively associated with the abnormal tone during earnings conference calls. The outcomes also reveal that the audience’s tone of firms meeting or just beating an earnings benchmark fails to predict future performance. This confirms the effectiveness of the tone management in managing the perception of audience.
Practical implications
This study highlights the need for increased accountability by firms on earnings conference call. It also supports academics and practitioners in understanding the management discretion used in reporting and communication during the earnings conference call. Overall, the results of this study are beneficial for regulators, policymakers and professionals, regarding confirming the need for the earnings conference calls to be regulated.
Originality/value
To the best of the authors’ knowledge, this is the first study that examines the association between earnings management and tone management in the UK earnings conference calls. It adds to the existing literature by examining the self-serving behaviour of managerial tone during earnings conference calls within a sitting in which meeting or just beating a benchmark is used. Unlike several studies that explain the behaviour of tone as a signalling strategy, this study reveals that the tendency of impression management behaviour can explain the tone management.
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Thuy Tran and Trung K. Do
The purpose of this study is to examine the effect of terrorist attacks on tax avoidance. Further, the authors identify the possible channel leading to our main result and examine…
Abstract
Purpose
The purpose of this study is to examine the effect of terrorist attacks on tax avoidance. Further, the authors identify the possible channel leading to our main result and examine the role of social pressure.
Design/methodology/approach
Data pertaining to terrorist attacks within the USA are procured from the Global Terrorism Database. The final sample consists of 45,524 firm-year observations from 1993 to 2017. The methodology uses ordinary least squares regressions.
Findings
The authors find that firms located in close proximity to terrorist attacks (i.e. impact firms) significantly decrease their tax avoidance practices after the attacks. The authors further find that these impact firms are willing to pay more taxes post attack when their headquarters are located in higher social capital regions.
Originality/value
Studies have mainly focused on the macroeconomic effects of terrorism, and only recently have researchers shifted their focus to firm-level impacts. The authors provide strong evidence that extends the second line of the literature by exploring corporate tax activities attributed to terrorist events.
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