Private Equity Investments and Disclosure Policy

In the current study, we dynamically analyze unlisted firms' voluntary disclosure decisions around private equity (PE) participation. First, we disentangle the role of disclosure in attracting PE investments. In addition, we examine the extent to which a firm's disclosure policy is affected by the changing corporate setting and intensified corporate governance after having received PE. We find no evidence that firms would employ increased disclosure to signal their quality in the years preceding the PE financing. However, we document a significant switch to increased financial disclosure from the PE investment year onwards, consistent with the hypothesis that PE investor presence positively affects portfolio firms' disclosure decisions. Further, we show that the proportional PE ownership stake is positively related to increased disclosure, but only at very high ownership levels. We explain these results in that both internal and external information demands call for higher public disclosure in PE firms. We conclude that the changing information environment resulting from a PE investment stimulates increased public financial disclosure. Our results contribute to illustrate how an indisputable change in governance resulting from a PE investment affects inter-temporal corporate disclosure decisions in unlisted firms.     

Environmental performance and bank lending: Evidence from unlisted firms

Growing public concerns about sustainability and adopting environmentally responsible practices increase risks as well as opportunities for firms and banks. It is unclear whether being environmentally responsible matters for unlisted firms, which are significant contributors to the degradation of the environment but which are not under strict scrutiny like public listed firms. Using a sample of 3915 firms from developing economies, we investigate whether the superior environmental performance of unlisted firms leads them to better loan conditions. After controlling for endogeneity and sample selection bias, we find that firms with better environmental performance received approximately 6.4% higher loans (as a ratio of total sales) and that this effect is more prominent in small and medium firms. This finding supports an information asymmetry view of agency costs. Our results, however, show that environmental performance does not affect loan duration and collateral requirement, indicating no spillover economic effect of corporate environmental performance on loan conditions. This partially supports a new perspective of legitimacy theory in relation to the ‘greenwash strategy’. Overall, our study shows that strategically engaged environmental activities that are integrated with core business objectives represent an important business strategy for firms to enhance credit access.     

Does audit report information improve financial distress prediction over Altman's traditional Z‐Score model?

We analyze empirically the usefulness of combining accounting and auditing data in order to predict corporate financial distress. Concretely, we examine whether audit report information incrementally predicts distress over a traditional accounting model: the Altman's Z‐Score model. Although the audit report seems to play a critical part in financial distress prediction because auditors should warn investors about any default risks, this is the first study that uses audit report disclosures for predicting purposes. From a dataset of 1,821 Spanish distressed private firms, we analyze a sample of distressed and non‐distressed firms and develop logit prediction models. Our results show that while the only accounting model registers a classification accuracy of 77%, combined models of accounting and auditing data exhibit considerably higher accuracy (about 87%). Specifically, our findings indicate that the number of disclosures included in the audit report, as well as disclosures related to a firm's going concern status, firms’ assets, and firms’ recognition of revenues and expenses contribute the most to the prediction. Our empirical evidence has implications for financial distress practice. For managers, our study highlights the importance of audit report disclosures for anticipating a financial distress situation. For regulators and auditors, our study underscores the importance of recent changes in regulation worldwide intended to increase auditor's transparency through a more informative audit report.     

上市公司财务危机预警“Z”值区域研究与分析

本文以上市公司作为研究对象,将公司因财务状况异常而被特别处理(ST)作为企业陷入财务困境的标志,利用奥特曼的Z记分模型作多元判别分析,测试符合我国上市公司实际情况的Z值,并将其作为我国上市公司财务危机预警的指标值。实证结果显示,采用多元判别分析可以得到判别财务危机公司与非财务危机公司的Z值区域,并且可以保证较高的判别精确度。同时也发现,相对于主营业务收入指标,现金流量指标为更好的警兆指标。     

财务困境预测中BP神经网络模型应用综述

金融危机席卷全球。处于金融市场之中的企业随时面,临着陷入财务困境的可能,财务困境预测模型的建立可以使公司提前预测到困境的发生,从而及早避免投资损失。随着信息技术的发展,人工神经网络预测模型开始兴起,本文重点介绍了BP神经网络模型在财务困境预测中的应用情况,并将BP神经网络模型与传统统计方法进行了比较分析。     

Failure Prediction: Evidence from Korea

This study is an attempt to construct and test a distress classification model for Korean companies. Utilizing a sample of 34 distressed firms from the recent 1990-1993 period and a matched (by industry and year) sample of non-failed firms, we observe the classification accuracy of two models. Both models utilize measures of firm size, asset turnover, solvency and leverage with one model available for testing only on publicly traded companies and one model applicable to all public and private entities. We observe excellent classification accuracy based on data from the first two years prior to distress. And, although the accuracy drops off after t -2, the models still provide effective early warnings of distress in many cases. The results of this study are of particular relevance in the current financial market scenario of increased deregulation and greater individual financial institution decision making. It is somewhat ironic for us to be proposing the use of a financial distress early-warning model given the current robust economic growth and low bankruptcy rate in Korea. But, the financial problems in Japan are a sobering reminder that high growth can be followed by financial excesses, increased business failures and large loan losses.     

Corporate financial distress: The case of publicly listed firms in an emerging market economy

Occurrences of financial distress (FD) are not readily obvious yet can span several periods. This paper examines episodes of FD using industry‐relative (IR) firm‐/ accounting‐, market‐ and macro‐level information. Mixed logit regressions reveal that firm‐ and market‐based measures, as well as macro‐level variables explain the likelihood of FD in 263 publicly listed non‐banking firms in the Philippines during the period 1995 to 2018. Rates of identification of firms in financial distressed states of close to 69 percent are obtained at a cutoff probability of 0.30 in the model with time‐varying intercept and slope. This study shows the importance of recognizing heterogeneous firm behavior. The ability to more accurately predict the probability of FD and to determine the financial health of firms can help financial institutions in allocating funds and policy makers in predicting crises episodes.     

Ultimate Controllers,Ownership and the Probability of Insolvency in Financially Distressed Firms

This paper investigates the impact of corporate ownership and control on the outcome of financial distress. It is argued that the likelihood of financial distress resulting in insolvency depends on whether firms have controllers, the type of controllers and their cash flow ownership. Using a sample of 484 UK firms, 81 of which filed for insolvency, we show that financially distressed firms with controllers are more likely to be insolvent than widely held firms, where the probability of insolvency is greater when controllers are family or financial institutions. However, the probability of insolvency reduces significantly as the controllers' cash flow ownership increases beyond 10%. Copyright © 2013 John Wiley & Sons, Ltd.     

An analysis of non-financial factors associated with financial distress

This article examines factors associated with financial distress among 1006 Spanish manufacturings (SMEs), distinguishing high and low technology industries. Financial distress is analysed using industrial organizational theory through the Porter's five competitive forces model (external factors) and the resource based view through strategic variables (internal factors), such as training, planning, innovation, technology and quality. Two different sources of information were used in the study: Qualitative information related to environmental conditions and strategic variables was gathered through a questionnaire addressed to the firm manager. Quantitative information to identify whether the firm was in financial distress was gathered from the balance sheets and earning statements of the firms. Evidence from this study shows that environmental conditions and some strategic variables are associated with financial distress. The results found that young SMEs with low technology and in a highly competitive environment had a higher probability of financial distress. High bargaining power of buyers and high degree of rivalry among existing competitors were positively associated with financial distress. Financial distress in high-technology industries was not affected by external factors. However, firms with a quality certification have better quality control procedures that ultimately improve financial performance of firms in the technology industries.     

Bank Relationships and Private Firms’ Financial Reporting Quality

Private firms with relatively high (proprietary) costs of disclosure may benefit from a close relationship with a bank. Relationship lending is based on intertemporal contracting that assumes that the bank is able to acquire private information about the firm and, moreover, to keep this information private. For both reasons, we expect and find that private firms with fewer bank relationships exhibit lower levels of financial reporting quality. Controlling for many other factors, firms with a single bank relationship disclose their financial reports about 14 days later. The size of such firms’ financial reports is also smaller, containing approximately 8% fewer words than the median report. Firms with a single bank relationship also exhibit more earnings management, exceeding the median value of the three-year sum of absolute discretionary accruals by about 20%. The results are robust to different econometric specifications, including endogeneity concerns. They indicate that private firms choose to be opaque in the presence of fewer lending relationships.     

从现金流的角度预测上市公司的财务困境

在众多企业都热衷于通过各种手段快速扩张的今天,企业往往容易忽视其财务上的风险.因此企业是否有进入财务困境的风险,怎样预测企业的财务困境,已经成为投资者、债权人等相关利益主体越来越关注的问题.本文从投资者最易获得信息之一现金流量表的角度,来分析企业在进入财务困境之前现金流量表相关项目所可能出现的异常情况,以帮助投资者更好的把握企业的财务状况。     

Forecasting short-term defaults of firms in a commercial network via Bayesian spatial and spatio-temporal methods

To protect financial institutions from unexpected credit losses, during the monitoring phase of granted loans it is of primary importance to foresee any evidence of a contagion of liquidity distress across a network of firms. This term indicates a situation of lack of solvency of a firm (e.g., a customer) that propagates to other firms (e.g, its suppliers), which could consequently face challenges in repaying their own granted loans. In this paper, we look for the evidence of contagion of liquidity distress on an Intesa Sanpaolo proprietary dataset by means of Bayesian spatial and spatio-temporal models. Our results indicate that such models can detect cases of distress not yet apparent from covariate information collected on the firms by instead borrowing information from the network, leading to improved forecasting performance on the prediction of short-term default with respect to state-of-the-art methods.     

Relative information asymmetry as a determinant of the market reaction to corporate financing announcements

Information-asymmetry-based models predict that the market should react negatively to unanticipated external financing. Previous empirical studies lend limited support to these conjectures. This study examines the anticipation issue using financial analysts' earnings-forecast errors as a proxy for information available prior to the external-financing announcement. The conjecture is that external financing would be less anticipated for firms which financial analysts cannot accurately predict their earnings. Event study results indicate that high-prediction-error firms exhibit significantly lower announcement period returns than lowprediction-error firms for non-convertible debt, convertible debt, and common stock offerings.     

我国上市公司财务困境与公司业绩之关系分析

文章通过对上市公司陷入财务困境后采取的重组措施以及重组前后公司业绩的定量分析,初步回答了我国上市公司财务困境与公司业绩的关系问题。     

High‐involvement work practices and analysts' forecasts of corporate earnings

Research has shown that high‐involvement work practices are positively related to corporate financial performance. However, it is unknown if investors are able to use information on high‐involvement practices to predict the performance of specific companies. In this study, we examine earnings forecasts for a sample of Fortune 1000 firms and find professional stock analysts consistently underestimated the earnings of firms that made greater use of high‐involvement practices during the 1990s. Based on data collected from newspaper articles and annual reports, we argue that these lower estimates resulted from a lack of information on innovative HR practices. Recommendations to managers for disseminating information on and leveraging highinvolvement HR practices are discussed. © 2006 Wiley Periodicals, Inc.     

Sustainability reporting quality and post‐audit financial reporting quality: Empirical evidence from the UK

This study examines whether firms that appear to exhibit high sustainability reporting quality are less likely to engage in earnings management activities, thereby delivering financial information that is more transparent and reliable than that delivered by firms that do not produce high‐quality sustainability reports. I also investigate whether the association between sustainability reporting quality and post‐audit financial reporting quality is conditional on audit effort. Analysis of data drawn from FTSE 350 companies covering 2007 to 2018 indicates that firms that produce high‐quality sustainability reports are significantly and negatively associated with earnings management metrics. More importantly, this association is moderated by audit effort, measured by audit fees, suggesting that sustainability reporting quality reflects factors considered by auditors in their audit risk assessment practices. These results remain robust after several sensitivity analyses. I conclude that firms that devote more resources to producing high‐quality sustainability reports are likely to demonstrate an overall commitment to quality that alleviates auditors' concerns about the opportunistic use of sustainability reporting and reduces business risk, thereby reducing the effort auditors expend to verify financial reports.     

A Comparison of Reporting Lags of Multinational and Domestic Firms

This study examines whether multinational firms report earnings sooner than domestic firms. When compared with domestic firms, the reporting environment and business operations of multinational firms are significantly more complex. There is a greater amount of information asymmetry between managers and shareholders of multinational firms. Therefore, multinational firms potentially face higher monitoring and external financing costs. To reduce these costs, we conjecture that managers of multinational firms take steps to reduce the information asymmetry between shareholders and management by increasing the timeliness (a proxy for relevance) of their earnings reports. Specifically, we expect multinational firms to announce earnings earlier than domestic firms. We separate earnings reporting delay into auditor‐related delay and management's discretionary delay. While test results weakly support the hypothesis that auditors take longer to audit multinational firms, there is strong evidence that managers of multinational firms release their earnings reports sooner than domestic firms.     

Financial distress and bankruptcy prediction: An appropriate model for listed firms in Vietnam

This paper aims to develop a comprehensive model, the first of its kind in Vietnam, for the purpose of predicting financial distress and bankruptcy at Vietnamese listed firms. The period 2003–2016 is used to study the likelihood of financial distress in different scenarios. Various factors are utilized, including (1) accounting factors in the emerging market score model; (2) market factors in the distance-to-default model; and (3) macroeconomic indicators. The area under the receiver operating characteristics (AUC) curve is used to compare the usefulness of various models that predict financial distress and bankruptcy. Empirical findings from this study show that accounting and market factors, together with macroeconomic fundamental factors, both affect financial distress when they are considered in isolation. However, in a comprehensive model, the effects from accounting factors appear to be more significant than those from market-based factors. The default prediction model, which includes accounting factors with macroeconomic indicators, appears to perform much better than the model comprising market-based factors with macroeconomic fundamentals.     

Market Risk Disclosures and Investment Efficiency: International Evidence from the Gulf Cooperation Council Financial Firms

This study examines the association between market risk disclosures (MRDs) and the investment efficiency of financial firms from six emerging markets in the Gulf Cooperation Council (GCC) region. Based on a sample of 553 firm‐year observations over the 2007–2011 period, we find that MRDs are significantly and negatively associated with both under‐investment and over‐investment and that this association is more pronounced for larger firms. We also find that the association between MRDs and under‐investment is moderated during periods of economic distress such as the Global Financial Crisis of 2008 and that the association between MRDs and over‐investment is magnified during periods of reduced financial distress. Our results are consistent with the idea that MRDs reduce information asymmetry, which ultimately improves investment efficiency. We contribute to the literature in an emerging market context by providing empirical evidence on the association between MRDs and investment efficiency across six emerging GCC capital markets. This study also fills a gap in the literature by providing evidence on the factors affecting the investment efficiency of financial firms.     

企业债务期限结构配置及其治理对策——湘火矩汽车股份案例

本文认为,债务期限结构错配是我国许多高速扩张企业出现流动性财务危机的主要原因之一,但在现有商业银行信贷期限结构错配和企业债券市场不发达的金融背景约束下,我国企业很难通过增加长期债务的方式来改变债务期限与资产期限错配的问题,唯有通过降低财务杠杆的方法来降低流动性风险。在现有金融市场条件下,企业现实的选择是债务期限结构错配和低财务杠杆,不能采用高财务杠杆方式来实现企业的高速增长,否则很容易陷入财务困境。