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Article

MANUEL GARCÍA‐AYUSO, INES MORENO‐CAMPOS and GUILLERMO SIERRA‐MOLINA

Fundamental analysis is aimed at assessing the intrinsic value of companies based on publicly available accounting information. Thus, the main purpose of fundamental

Abstract

Fundamental analysis is aimed at assessing the intrinsic value of companies based on publicly available accounting information. Thus, the main purpose of fundamental analysis research should be identifying the main determinants of value, establishing empirical relations between them and fundamental accounting variables, and finally, predicting the future behavior of such variables to estimate the value of the firm. Traditional fundamental analysis ignores the existence of some intangible assets, such as intellectual capital, that are currently considered as the main determinants of value. Human capital is an essential component of intellectual capital. This paper provides evidence on the extent to which the quality of human resources is related to the value of accounting variables that are used in fundamental analysis due to their perceived usefulness as proxies for investors' expectations on the firm's future profitability and growth in both, earnings and shareholders' equity.

Details

Journal of Human Resource Costing & Accounting, vol. 5 no. 1
Type: Research Article
ISSN: 1401-338X

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Book part

Glenn Growe, Marinus DeBruine, John Y. Lee and José F. Tudón Maldonado

This paper examines the profitability and performance measurement of U.S. regional banks during the period 1994–2011, using the GMM estimator technique. Our study extends…

Abstract

Purpose

This paper examines the profitability and performance measurement of U.S. regional banks during the period 1994–2011, using the GMM estimator technique. Our study extends prior research by including several factors not previously considered using U.S. data.

Approach

We use bank-specific, industry-specific, and macroeconomic determinants of profitability contemporaneous with our performance indicators. We follow the accounting fundamental analysis path in explaining the bank performance.

Findings

Among the performance measures, the efficiency ratio and provisions for credit losses are negatively and equity scaled by assets is positively related to profitability. However, these relationships either reverse (efficiency ratio and provisions for credit losses) or become insignificant (equity scaled by assets) when the target becomes change in profitability. The level of nonperforming assets is negatively related to profitability across all measures of profitability used. Macroeconomic variables are largely unrelated to profitability during the year they are measured. However, they have a significant relationship with earnings change measures, suggesting they have a lagged effect on profitability. The slope of the yield curve is especially strong in this regard.

Originality

We use our determinants to model changes in bank profitability one year ahead, in addition to including several factors not previously considered, using the predictive focus of the fundamental analysis research.

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Book part

Shaw K. Chen, Chung-Jen Fu and Yu-Lin Chang

A one-year-ahead price change forecasting model is proposed based on the fundamental analysis to examine the relationship between equity market value and financial…

Abstract

A one-year-ahead price change forecasting model is proposed based on the fundamental analysis to examine the relationship between equity market value and financial performance measures. By including book value and six financial statement items in the valuation model, current firm value can be determined and the estimation error can predict the direction and magnitude of future returns of a given portfolio. The six financial performance measures represent both cash flows – cash flows from operations (CFO), cash flows from investing (CFI), and cash flows from financing (CFF) – as well as net income – R&D expenditures (R&D), operating income (OI), and adjusted nonoperating income (ANOI). This study uses a 10-year sample of the Taiwan information electronic industry (1995–2004 with 2,465 firm-year observations). We find hedge portfolios (consisting of a long position in the most underpriced portfolio and an offsetting short position in the most overpriced portfolio) provide an average annual return of 43%, more than three times the average annual stock return of 12.6%. The result shows the estimation error can be a good stock return predictor; however, the return of hedge portfolios generally decreases as the market matures.

Details

Advances in Business and Management Forecasting
Type: Book
ISBN: 978-1-84855-548-8

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Article

Lianzan Xu

This study examines the ability of fundamental summary measure Pr to predict earnings change for the subsequent year, the association of Pr and stock returns, and the…

Abstract

This study examines the ability of fundamental summary measure Pr to predict earnings change for the subsequent year, the association of Pr and stock returns, and the relationship between Pr and risk factors beta and size. Pr is a probability index generated by logistic model and financial statement data. Beta effect is minimized by grouping firms into beta portfolios while size is controlled through incorporating size as an independent variable in the regression models. Evidence from the study indicates that Pr has a strong ability to predict future earnings change and has a positive and significant association with adjusted market returns, after controlling for beta. Pr's association with adjusted market returns is mitigated when beta and size are controlled simultaneously.

Details

International Journal of Commerce and Management, vol. 13 no. 1
Type: Research Article
ISSN: 1056-9219

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Article

John G. St Quinton

Identifying the fundamental characteristics of meaning and deriving an automated meaning‐analysis procedure for machine intelligence.

Abstract

Purpose

Identifying the fundamental characteristics of meaning and deriving an automated meaning‐analysis procedure for machine intelligence.

Design/methodology/approach

Semantic category theory (SCT) is an original testable scientific theory, based on readily available data: not assumptions or axioms. SCT can therefore be refuted by irreconcilable data: not opinion.

Findings

Human language involves four totally independent semantic categories (SC), each of which has its own distinctive form of “Truth”. Any sentence that assigns the characteristics of one SC to another SC involves what is termed here “Semantic Intertwine”. Semantic intertwine often lies at the core of semantic ambiguity, sophistry and paradox: problems that have plagued human reason since antiquity.

Research limitations/implications

SCT is applicable to any endeavour involving human language. Research applications are therefore somewhat extensive. For example, identifying metaphors posing as science, or natural language processing/translation, or solving disparate paradox types, as illustrated by worked examples from: The Liar Group, Sorites Inductive, Russell's Set Theoretic and Zeno's Paradoxes.

Practical implications

To interact successfully with human language, behaviour, and belief systems, as well as their own environment, intelligent machines will need to resolve the semantic component/intertwines of any sentence. Semantic category analysis (SCA), derived from SCT, and also described here, can be used to analyse any sentence or argument, however complex.

Originality/value

Both SCT and SCA are original. Whilst “category error” is an intuitive notion, the observably precise nature, number and modes of interaction of such categories have never previously been presented. With SCT/SCA the rigorous analysis of any argument, whether foisted, valid, or obfuscating, is now possible: by man or machine.

Details

Kybernetes, vol. 34 no. 9/10
Type: Research Article
ISSN: 0368-492X

Keywords

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Article

Xiaobao Song and Wenjia Zheng

The purpose of this paper is to examine securities analyst independence in China's capital market and the effect on analyst independence of institutional investors…

Abstract

Purpose

The purpose of this paper is to examine securities analyst independence in China's capital market and the effect on analyst independence of institutional investors’ shareholding and separation between control rights and cash flow rights of ultimate controller.

Design/methodology/approach

Using data of China's listed companies from 2006 to 2012, the authors empirically tested the relationship between analyst following and volatility of stock return. And based on the test, the authors investigated the role played by institutional investors’ ownership and separation between control rights and cash flow rights of ultimate controller.

Findings

According to the empirical results, there is a significant negative correlation between analyst following and volatility of stock return. Also, shareholding of institutional investors and the separation between control rights and cash flow rights of ultimate controllers will have an impact on the relationship between analyst following and volatility of stock return. When institutional investors hold higher proportion or the separation between control rights and cash flow rights of ultimate controllers keeps at a high level, the negative correlation between analyst following and volatility of stock return will weaken.

Originality/value

First, based on the theory of market intermediation, the paper examined analyst independence by investigating and analyzing the relationship between analyst following and volatility of stock return. Second, it analyzed the factors affecting analyst independence by integrating enterprise characteristic variable and market characteristic variable on the basis of introducing two variables – shareholding of institutional investors and the separation between control rights and cash flow rights of ultimate controllers.

Details

China Finance Review International, vol. 4 no. 2
Type: Research Article
ISSN: 2044-1398

Keywords

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Article

Joko Mariyono, Hanik Anggraeni Dewi, Putu Bagus Daroini, Evy Latifah, Arief Lukman Hakim and Gregory C. Luther

A research and development project disseminated ecological technologies to approximately 3,250 vegetable farmers through farmer field schools (FFS) in four districts of…

Abstract

Purpose

A research and development project disseminated ecological technologies to approximately 3,250 vegetable farmers through farmer field schools (FFS) in four districts of Bali and East Java provinces of Indonesia. This article aims to assess the economic sustainability of vegetable production after FFS participation.

Design/methodology/approach

A survey randomly sampled 500 farmers, comprised of FFS participants (50%) and non-FFS participants (50%). Based on 1,000 farm operations, this analysis employed input-saving technology as the fundamental model examined using the double-difference method. Simultaneous reduction of agrochemicals and improvement of productivity represent indicators of economic sustainability.

Findings

Results indicate that pesticide use decreased without jeopardising farm productivity; moreover, vegetable production increased. These findings indicate that the ecological technologies transferred through FFS significantly improved economic sustainability performance.

Research limitations/implications

This study purposively selected farmers who grew tomato and chilli. Thus, the outcomes are not generalisable to other crops.

Practical implications

FFS continues to be an effective method for transferring agricultural technologies to farmer communities. Policymakers are recommended to use FFS for disseminating beneficial and sustainable technologies to broader agricultural communities.

Social implications

The adoption of ecological technologies provides positive economic and ecological milieus.

Originality/value

This study employs a double-differences approach to verify input-saving technological progress. Therefore, the performance of economic sustainability attributable to the project intervention is theoretically justified.

Details

International Journal of Productivity and Performance Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1741-0401

Keywords

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Article

Brian D. Bergquist, Dawn L. Keig and Timothy J. Wilkinson

Schools must not necessarily have a large amount of money or advanced finance curriculum for students to get the benefits of participating in a student-managed investment…

Abstract

Purpose

Schools must not necessarily have a large amount of money or advanced finance curriculum for students to get the benefits of participating in a student-managed investment program. Any college or university with motivated students and faculty can have a successful program if they are willing to put forth the effort. The paper aims to discuss this issue.

Design/methodology/approach

The authors use a case study approach to examine specific characteristics of a successful student investment group implementation at a small liberal arts university in the Northwest USA.

Findings

Three student investment group implementation considerations are highlighted in this analysis: establishing an inclusive, interdisciplinary focus in a long-term club vs course format; utilizing all student-led training, governance and investment methodologies; and designing group processes with an emphasis on critical thinking and community outreach.

Practical implications

This case offers encouraging insights for how even a smaller college or university might successfully create and sustain a thriving successful student-led investment group with a relatively limited amount of funding and resources by leveraging liberal arts foundations.

Originality/value

An emphasis on how student-managed investment groups are tied to broader liberal arts foundations potentially helps schools of all sizes understand certain unique underlying value aspects for the students, the business programs and the broader university community.

Details

Managerial Finance, vol. 46 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

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Book part

Rebecca Bloch, Gary Kleinman and Amanda Peterson

The purpose of this paper is to develop a comprehensive theory as to why academic research in accounting is said not to help practice.The authors (1) present a…

Abstract

The purpose of this paper is to develop a comprehensive theory as to why academic research in accounting is said not to help practice.

The authors (1) present a comprehensive literature review in the academic/practitioner gap arena, and (2) develop a theoretical background for it. Further, they identify (3) the different information needs of these groups using value group theory and (4) the inherent factors and personality traits that influence career choice. Next, they (5) evaluate the values of each subgroup. They then (6) theorize what types of accounting research would interest each. They argue that (7) individuals who enter the academy differ from those who enter practice, and (8) the socialization processes and the impact of the professional setting (practice or academe) on behaviors further the separation of academic research from practitioner needs.

This paper is theoretical. It suggests that bridging the gap will be difficult. The study is theoretical. The limitation is that it does not empirically test the relationships hypothesized. By providing a comprehensive model of factors underlying the gap, however, it can be a fruitful source of research ideas for years to come. The implications are that it will be difficult to bridge the gap between accounting practitioners and academics. Having a greater understanding of the causes of the gap, however, may be very useful in fostering thought as to how to overcome it.

Prior literature on the topic is largely atheoretical. This paper is the first to develop a broad theory of the gap.

Details

Parables, Myths and Risks
Type: Book
ISBN: 978-1-78714-534-4

Keywords

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Article

Ahmad Abdollahi, Yasser Rezaei Pitenoei and Mehdi Safari Gerayli

The present study sets out to examine the effect of auditor's report and audit firm size on the value relevance of accounting information of the companies listed on the…

Abstract

Purpose

The present study sets out to examine the effect of auditor's report and audit firm size on the value relevance of accounting information of the companies listed on the Tehran Stock Exchange during the years 2008–2017.

Design/methodology/approach

The study includes a sample of 1,530 firm-year observations drawn from the listed companies, and the research hypotheses were analyzed using multivariate regression model based on panel data.

Findings

The findings reveal that auditor's report and audit firm size are positively and significantly correlated with two indicators of the value relevance of accounting information including value relevance of earnings and book value per share. Also our results exhibit robustness to the alternative measure of auditor's attributes.

Research limitations/implications

As far as we know, this is the first study to analyze the association between auditor's attributes and value relevance of accounting information in emerging capital markets, thereby generating certain implications for investors, managers, capital market policy makers and audit profession regulators in general and those in emerging markets in particular.

Practical implications

Our findings have implications for policy makers, regulators, managers and investors. Our evidence on the positive association between auditor's size and value relevance of accounting information should help policy makers and regulators which they improve value relevance of accounting information and financial reporting by integrating small audit firms and setting up larger audit firms.

Originality/value

A rise in the value relevance of accounting information deserves further attention while drawing investment, selling the stocks of existing firms and increasing investor's decision-making ability. The way how auditor's attributes can promote the value relevance of accounting information is still open to new research.

Details

Journal of Applied Accounting Research, vol. 21 no. 4
Type: Research Article
ISSN: 0967-5426

Keywords

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