• The Journal of Industrial Distribution & Business
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• v.5 no.1
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• pp.5-9
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• 2014

Purpose - This study aims to examine the incremental information content of cash flw from operations and earnings in the Iranian capital market. Design, methodology, and approach - Based on market-based accounting research, this study uses statistical associations between accounting data (earnings and cash flw) and stock returns to assess/measure the incremental information content (value relevance) of cash flw and earnings. A multivariate regression model based on panel data is used to examine the incremental information content of earnings and cash flow from operations. Results - The results show that both earnings and cash flow from operations have incremental information content beyond each other. These results are consistent with the findings of recent studies. Overall, the fidings of this study support the usefulness of cash flw information in addition to earnings, in fim valuation by investors in the Iranian market. Conclusions - The study makes the following contributions to the Iranian literature on incremental information content of cash flw and earnings. First, this study employs actual cash flw data derived from cash flw statements. Second, this study employs a large sample size for a more recent period.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.5
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• pp.19-29
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• 2020

The paper examines the impact of information about cash flow from operating activities of firms listed on Vietnam's stock market to the decision making of individual investors. Data were collected from interviews with 160 individual investors about their investment decisions based on information on profit growth and cash flow growth from operating activities. T-test was conducted to research on Vietnam's stock market - a market considered as information that is not really public, transparent and ineffective. The research results show that: (1) investors do not care about cash flow from operating activities when making investment decisions if the company's profits grow positively, (2) information about cash flow from operating activities only affects the decisions of individual investors once profit growth is negative, and (3) conflicting information between profit growth and cash flow growth from business activities significantly affects the confidence and comfort of investors in Vietnam's stock market when they make investment decisions. Then, the study points out the mistake of investors when making investment decisions, and offers recommendations to investors when making investment decisions, not only concerned with profit growth, but also paying special attention to cash flow growth, especially cash flow from the company's business operations.

• Journal of the Korean Operations Research and Management Science Society
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• v.15 no.2
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• pp.45-61
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• 1990

This study examines shareholder wealth effects in tender offers and attempts to explain abnormal return variations of bidding and target firms at announcement of takeovers using the free cash flow hypothesis of Jensen. On average, bidders with large free cash flows pay higher premia (apparently more than fair market value) to targets than do other bidders with no free cash flows. Thereby, these bidders experience negative wealth effects on announcement of tender offers. Cross-sectional regression analysis suggests that for the subsample of takeover bids where bidders have large free cash flows, the increase in the debt ratio resulting from takeover has a significant positive wealth effect for bidding firm shareholders, while it has no effect in other subsamples. The evidence is consistent with the free cash flow hypothesis.

• Journal of Distribution Science
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• v.12 no.4
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• pp.85-92
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• 2014

Purpose - This study conducted empirical research on non-financial corporations listed on the stock exchange from 2001 to 2010, focusing on the effects of corporate governance on real earnings management of corporations. In particular, this study examined primarily the impact of the largest shareholder who could use earnings management to pursue his own self-interest, and foreign investors who played a checking role against the largest shareholders. The study also reviewed the relationship between corporate governance and earnings management while also considering corporate growth. Research design, data, and methodology - As for the measurements of real earnings management, abnormal operating cash flow and abnormal production cost were utilized. As for the independent variables, share ratio of the largest shareholder and affiliate person (M) and share ratio of foreign investors (FT) were leveraged. This study excluded those organizations that had changed their fiscal years, those that had not submitted an audit report, corporations under supervision, delisted corporations, corporations that had changed their business type, and so on, from the non-financial corporations out of the publicly traded corporations whose fiscal year ended in December from 2001 to 2010 in addition, KIS values were utilized for the corporate financial data in the study. To verify whether management structure and growth had an impact on real earnings management of a corporation through empirical analysis, a multiple regression analysis model was applied. Result - First, as a result of the analysis, the share ratio (M) of the largest shareholder and affiliate person was found to have a significant positive correlation with abnormal cash flow from operations(ACF) and abnormal production cost (APD). When controlling the growth, the share ratio (M) of the largest shareholder and affiliate person was found to have an insignificant correlation with abnormal cash flow from operations(ACF) but a significant correlation with abnormal production cost (APD). Second, foreign ownership (FT) was found to have a significant positive correlation with abnormal cash flow from operations(ACF) and abnormal production cost (APD) at the confidence level of 1 percent when not including the growth dummy. When controlling the growth, foreign ownership (FT) was found to have a significant negative correlation with abnormal cash flow from operations (ACF) and with abnormal production cost (APD). Conclusion - The results imply that the largest shareholder is closely related to earnings management through real activities regardless of corporate growth. It is also possible to determine from these results that foreign investors are related to earnings management through real activities when not considering corporate growth, but that they would reduce earnings management in the case of considering the growth. Thus, this study verified along with the existing studies that foreign investors were conducting the control function on controlling shareholders.

• The Journal of the Korea Contents Association
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• v.16 no.2
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• pp.580-587
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• 2016

This paper examined the relationship among corporate cash flow, its accruals, and its factors with its continuity of profit and corporate value by regression analysis of KOSDAQ based midsize manufacturing enterprises for 11 years from 2004 to 2014 year. Through this empirical analyze, corporate operators can have a chance to find opportunities to improve the efficiency of business operations, and to the potential investors, it can give the perspective through providing the basic information for the rational investment decisions. Through this analysis, its cash flow, accruals and its factors showed continually a significant relationship with its corporate operating profits and its market values. Thought out the relation analysis, its cash flow, its accurals and the factors of the accruals, account receivables, inventories affected the positive(+) impact on its business profits. But, its account payables affected negative(-) impact on its business profit. The other hand, the cash flow from operating activities and accruals related to capitalization of assets and liabilities fluctuations affected a positive(+) effect on the company market value.

• Korean Management Science Review
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• v.31 no.3
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• pp.95-111
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• 2014

It is essential to carry out an economic analysis on public water supply projects so that policy makers and water enterprises are aware of the actual value of the project. However, many popular approaches based on discounted cash flow analysis do not capture the uncertainties inherent in cash flow. In order to analyze the economic values of the water supply project of local governments, we utilize real option model, which considers uncertainty in future water price behavior and captures the value of real life flexibility. The real option model is designed to incorporate the option to expand and abandon, and it is applied to a local government case. Furthermore, we assess the project by exploring Luehrman's option space to accommodate the more efficient decision making. The results show that substantial amount of potential value is included in the public water supply service, and the overall value is greater than the value obtained from the discounted cash flow model.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.8
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• pp.57-66
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• 2021

The outbreak of the financial crisis, the lack of corporate governance practices in Iraqi companies, the high level of earnings management (EM), and weak firm performance (FP) have all encouraged the purpose of this study. This study proposes to achieve the following objectives: (I) to investigate the influence of governance mechanisms on the earnings management practices, (II) to investigate the consequence of EM on FP. The study sample includes 65 Iraqi firms listed on the Iraqi stock exchange for six years from 2012 to 2018, with 390 firm-year observations. The hypotheses were tested using panel data regression. According to the findings, Iraqi companies prefer to use real EM rather than accruals EM to avoid reporting losses. Discretionary cash flow, production costs, and cash flow from operation are examples of actual operations employed to undertake EM. Furthermore, according to the findings of this study, board meeting frequency and female onboard have a significant and negative influence on EM. Besides, the internal audit function was found not to affect EM. On the other hand, results revealed a significant and negative relationship between EM and FP. According to the study, management prefers to minimize cash and accrual expenditure during the economic downturn.

• Korean Management Science Review
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• v.32 no.1
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• pp.113-131
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• 2015

We examine the relationship between firms' environmental (E), social (S), and governance (G) factors, with their financial performance in order to provide an empirical rationale for CSV (creating shared value) pursuing both of firms' profitability and CSR (corporate social responsibility). The financial performance is classified into four aspects such as profitability, stability, efficiency, and cash-flow, and each of these aspects is measured by two financial ratios respectively. To measure the firms' ESG performance, we employ the published performance grades by the Korea Corporate Governance Service for a three year span, from 2011 to 2013. Total of eight regression analyses are performed. The results show that firms' non-financial performance in general has statistically significant positive relationships with return on assets, return on net sales, and cash-flow from operating activities ratio, while it has negative relationships with net working capital ratio, asset turnover ratio, and cash-flow from investing activities ratio. It has no significant relationships with debt ratio and equity turnover ratio. The results imply that firms' non-financial performance may have a negative impact on some financial performance such as liquidity and efficiency in a short term, but it would eventually improve the firms' profitability and cash-generating ability, which provides an empirical evidence for the concept of CSV, and motivates the firms to participate in social contribution activities without sacrificing their profitability for their respective sustainablity management.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.2
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• pp.135-142
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• 2021

This study aims to examine the impact of audit committee characteristics on income management of companies listed on the Stock Exchange of Vietnam. Research data was collected from all 745 listed companies on Vietnam's stock market over four years, from 2015 to 2018. After excluding companies that did not qualify, there were 216 companies with 864 observations. With the help of dedicated software Stata 15, the impact of audit committee characteristics (through independent variables and control variables such as Audit Committee Independence, Auditing Committee size, Auditing Committee Expertise, Auditing Committee Meeting Frequency, Company Size, Financial Leverage, and Operating Cash Flow) to earning management through a multivariate regression model was determined. Research results from Vietnamese listed companies during this period show that the size and expertise of the audit committee are inversely related to the discretionary accruals representing earning management. At the same time, the research results also identify a positive relationship between firm size and earning management, and the inverse relationship between financial leverage, net cash flow from operating operations and earning management. However, the multivariate regression results do not find clear evidence of a relationship between audit committee independence and the audit committee meeting frequency to earning management.

• The Journal of Information Technology
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• v.1 no.2
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• pp.209-227
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• 1998

This study examines the relation between accruals components of earnings and stock return. Earnings are decomposed into four components: discretionary accruals, nondiscretionary accruals, nondiscretionary income and cash flow from operations. Because reported earnings in financial statement consist of cash flow from operations plus total accruals. We decompose total accruals into a discretionary accruals and a nondiscretionary accruals separately, This paper examines the incremental informational content of discretionary accruals and nondiscretionary accruals components of net income by regressing return on earnings'components in multivariate models. The empirical analysis is conducted on a sample of 1,580 firm-years comprising 158 firms during 1984-1995. Discretionary accruals are obtained by decomposing total accruals into discretionary and nondiscretionary accruals components, using a pooled variation of the Jones model(1991). These findings suggest that the discretionary accruals(measured using a variation the Jones model) is priced by the stock market. Specifically, the discretionary accruals and cash flow from operations are positively associated with the stock return, and also nondiscretionary income, discretionary accruals are positively associated with the stock return. While this result is consistent with the market prices the discretionary accruals because it captures value-relevant information. Additional test report evidence consistent with nondiscretionary accruals conveying information about the stock return.